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How to Prepare in Advance for a Medicaid Application

As many of us age, it becomes appropriate to consider the possibility for alternative living arrangements at some point down the road.  Alternative living arrangements have been the topic of discussion on this blog for the past few weeks.  Folks who are considering alternative living arrangements have to consider how they will pay the costs associated with these facilities.

One way of paying for long-term care in a skilled nursing facility is to apply for Medicaid benefits.  Medicaid is a joint federal and state program that pays basic nursing home costs for those who qualify.  In Alabama, over 60% of all nursing home beds are funded by Medicaid.  For those individuals who become unable to continue funding their stay in a nursing home, Medicaid is essential.

There are certain things people who may need nursing home care in the next 5 years (and their spouses) should do to make any eventual need to apply for Medicaid a smoother process.  Medicaid “looks back” 5 years from the time of application to ensure that no assets of the individual have been given away for less than fair market value.  If they find that there have been gifts of money or property, they assume these “transfers” were intended to dump assets in order to be able to qualify for Medicaid, and they impose a “transfer penalty.”

People who may need nursing home care within the next five years, and their spouses, should:

  • Have an updated Power of Attorney allowing an Agent to act on their behalf if they become incapacitated;
  • Keep detailed financial records dating back 5 years;
  • Limit their number of accounts;
  • Avoid making large cash withdrawals;
  • Avoid allowing children to sign checks to “cash”;
  • Avoid writing checks to family members, even if the family member is being reimbursed.  It is better for the senior to pay bills directly;
  • Avoid co-mingling funds with anyone other than the spouse;
  • Avoid paying sitters in cash.  Medicaid requires documentation that the funds were not transferred to relatives.

Basically, the simpler the financial situation and the more documentation regarding movement of any funds, the better.

We also recommend banking with an institution that provides check images with your online account statements.  This, again, just makes things easier if you need to prove where some money went if applying for Medicaid down the road.

 

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