Medicaid Mayhem (II): Excellent Exceptions

"There’s always an exception that proves the rule.”

- Anonymous

We started out our Medicaid discussion by talking about the basics. Your Medicaid application will be successful only if you own $2,000 or less of (allowable) assets. One your application is approved, you must then contribute all of your income toward paying for your care. Today, we’re going to start talking about that little word in parentheses: “allowable.”

Title XIX of the Social Security Act provides for the exclusion of a variety of assets when calculating the total assets owned by a Medicaid applicant. These exclusions take several forms: there are exclusions for certain financial instruments, exemptions for certain physical assets, and exceptions for when a spouse is involved.

For example: a single Medicaid applicant may own one automobile in addition to the $2,000 asset limit. Other allowable assets include a pre-paid funeral plan and life insurance with no cash value.

The exemptions, exclusions, and exceptions are the bread and butter for an attorney with experience in long-term care planning. Stay tuned to the Medicaid Mayhem series to learn more about some of these options.

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Lawyer Joke of the Day:

Did you hear they just released a new Barbie doll called "Divorced Barbie"? It comes with half of Ken's things and alimony.

Medicaid Mayhem (I), Two Simple Rules?

"Medicaid is the primary payer of Long Term Care.”

- Vincent Russo

One of my goals for this blog is to make it a place where people can go to get basic questions answered. With that in mind, this post shall be the first in an ongoing series of posts called Medicaid Mayhem. Let’s start today by talking about the standard rules on which the long-term care portion of Medicaid is built. (As an aside, Medicaid and Title XIX are interchangeable terms for purposes of this series.)

The Medicaid system is designed to act as a health insurance provider for low-income, low-net worth people. The theory is that you can apply for and receive government assistance if you cannot pay for your health care on your own. This extends to the nursing home program of Medicaid as well. To receive Medicaid assistance for your nursing home care, you must comply with two major rules.

1. You must have assets with a value of no more than $2,000 total.
   
2. You must contribute all of your income toward paying for your care.

These rules are the guiding principles under which all Medicaid applications are evaluated.

Looks pretty simple, right? It’s not. There are loads of rules on what assets are counted as part of the $2,000 limit and how applications are evaluated for married couples. These rules are what make Medicaid a complicated system. Don’t make major financial decisions in an effort to get on Medicaid. Seek the help of a trusted advisor with knowledge of the system.

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Lawyer Joke of the Day:

An engineer, a physicist, and a lawyer were being interviewed for a position as chief executive officer of a large corporation. The engineer was interviewed first, and was asked a long list of questions, ending with "How much is two plus two?" The engineer excused himself, and made a series of measurements and calculations before returning to the board room and announcing, "Four."

The physicist was next interviewed, and was asked the same questions. Before answering the last question, he excused himself, made for the library, and did a great deal of research. After a consultation with the United States Bureau of Standards and many calculations, he also announced "Four."

The lawyer was interviewed last, and was asked the same questions. At the end of his interview, before answering the last question, he drew all the shades in the room, looked outside the door to see if anyone was there, checked the telephone for listening devices, and asked "How much do you want it to be?"

It Costs a Lot to Die These Days

"They say such nice things about people at their funerals that it makes me sad to realize I’m going to miss mine by just a few days.”

- Garrison Keillor

One of the most logical and effective ways to plan for Medicaid eligibility is to prepay your funeral expenses. As uncomfortable as contemplating your own mortality is, creating a funeral plan with an itemized list of expenditures can allow you to protect a significant amount of money when you need nursing home care. The reason this is such a logical planning option is that creating a funeral plan allows you to set aside money that will be spent regardless of whether you plan ahead or not. Planning to pay for your funeral is like planning to pay the gas bill. It has to happen eventually.

Furthermore, creating a funeral plan is an extremely effective Medicaid planning tool because funeral expenses are so high. In the town where my physical office is located, the average funeral costs $9,000 - $12,000, depending on which costs you include. Funeral home expenses alone fall in the $9,000-$10,000 range. If you add in the cemetery plot and monument, a single person can easily spend $12,000 before all is said and done.

These expenses are intimidating for a lot of people. And rightly so; funerals are expensive! But the high cost of a funeral allows an individual to place a substantial amount of funds into a prepaid plan which will cover those costs. Because such a prepaid plan is Medicaid-exempt, it’s a good idea to consider prepaying funeral expenses when a Medicaid application is imminent.

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Lawyer Joke of the Day: (Apologies if this one is offensive. It made me laugh out loud.)

Satan was complaining bitterly to God, "You made the world so that it was not fair, and you made it so that most people would have to struggle every day, fight against their innate wishes and desires, and deal with all sorts of losses, grief, disasters, and catastrophes. Yet people worship and adore you. People fight, get arrested, and cheat each other, and I get blamed, even when it is not my fault. Sure, I'm evil, but give me a break. Can't you do something to make them stop blaming me?"

And so, God created lawyers.