Medicaid Eligibility Strategies

Planning Strategies to Help Gain Medicaid Eligibility

Remember, when conducting Medicaid planning, all assets are initially categorized as either countable or non-countable assets for purposes of determining Medicaid eligibility for long-term care. The difference between countable resources and the properly calculated protected amount is the total amount of excess resources that must be "spent down" to gain Medicaid eligibility. The presence of excess resources causes a patient to be ineligible for Medicaid coverage until the assets are depleted to or below the protected amount. The Medicaid program's presumption in fashioning the rules this way is that the excess resources are to be spent on nursing home care and other expenses until the assets fall below the applicable resource limit. Hence, the depletion of assets to or below the protected limit is known as the "spenddown." However, "spenddown" is a misnomer, since there is no actual requirement to spend the resources on nursing home care. What Medicaid planning does, in practice, is to transfer or convert assets from countable to non-countable until the total amount of countable resources is less than or equal to the protected amount.

Medicaid planning, after the stage where the protected amount is determined, is the art of efficiently converting countable assets to protected assets to reduce the total countable assets below the protected amount, thus making a patient eligible for Medicaid long-term care benefits. This asset conversion process satisfies the Medicaid spenddown as sufficiently as actually spending the excess assets directly on the cost of care. The only difference is that through asset repositioning, some assets that would have been spent are conserved.

Thus, a patient or a married couple can spend resources on non-nursing home expenses. Just because a protected amount of resources has been determined does not mean that the unprotected amount is walled-off and reserved only for long-term care bills. It just means that the resources must be properly depleted below the protected amount prior to establishing eligibility.

"Proper depletion" is just another term for purchases for fair market value. Such purchases are commercial transactions where fair market value is paid in exchange for a good or service. If the purchase results in the ownership of non-countable assets, not only is the transfer exempt from a divestment penalty, but the resulting assets are protected because of its classification. This conversion of assets from countable to non-countable through fair market purchases is the basis of the Medicaid planning strategy. This strategy, for the most part, is a series of simple maneuvers that take advantage of the basics of the fair market value transactions described above.

Common Asset Conversion Strategies

• Purchase tangible personal property - There is no asset limit for the quantity and value of personal items purchased and held by the person or couple, provided the items purchased are not deemed to be investment grade. While this strategy has no actual limit in value, practically speaking, it is not ideal for large sums of money, because most such consumer purchases lose value over time.
• Homestead advantages - Because a homestead's equity is a protected resource, this asset category represents a huge potential to convert excess countable resources to non-countable resources. Options may include:
  1. Renovate the home
  2. Buy a new home
• Upgrade the vehicle - Provided that the patient's or Community Spouse's vehicle is the main source of transportation, the regulations allow for one vehicle to be excluded from being counted as a countable asset.
• Prepay funeral/ burial expenses
• Personal services contracts - Medicaid views the taking care of a patient to be gratis,and payment for such to be a gift, subject to a divestment penalty. To avoid this trap, a legal contract can be created between the patient and caregiver that formalizes the relationship and turns what would be a penalized gift into a fair market value payment for services. Contracts can only be prospective: any services provided before execution of the contract are considered gratis,and the contract cannot go backward and authorize payment for previous services. Be careful here; you should consult a Certified Medicaid Planner before launching into this strategy, because there are detailed rules governing these transactions.
• Annuities and promissory notes - In this strategy, a lump sum is transferred to a person or company in exchange for a promise to repay. The subsequent repayments result in the conversion of a countable asset (cash) into an income stream. Frequently, this is done with the goal of converting a countable asset into an enhanced income for the Community Spouse. If an annuity is purchased, it must be a Medicaid-compliant annuity, so this strategy requires supervision by a Certified Medicaid Planner to adopt. This strategy is often combined with strategic divestment, which will be discussed further in the section of this website discussing Divestments.
• Caring for disabled family - A blind or disabled child can be the recipient of unlimited assets, either directly or through a trust set up by the parent for the benefit of the blind or disabled child.
• Other complex and difficult strategies - The aforementioned are just a few of the more common strategies utilized in qualification for Medicaid benefits for long-term care. Consult with your Certified Medicaid Planner for other techniques tailored to your specific situation.

Contact Our Louisiana Medicaid Eligibility Strategy Attorney

To learn more about how The Louisiana Medicaid Law Firm can help you take steps to preserve your eligibility for Medicaid long-term care, contact us at 504-447-6000 and set up an initial consultation.