Medicaid is a needs-based insurance program for those with below-average income. States use federal funding to provide health insurance to people who cannot afford care or even private health insurance coverage.
Medicaid can help people in all stages of life, but it may be especially important for those with long-term care needs in their golden years. Most legal professionals recommend planning for Medicaid long before applying to avoid penalties.
Medicaid penalties can put financial pressure on those with limited resources and prevent them from getting the benefits they require. When are people at risk of a Medicaid penalty when they apply?
Recent transfers and gifts can trigger a penalty
People requesting Medicaid coverage for long-term care costs are subject to two financial restrictions. They have to have income below the current threshold. They also face a strict limit on their countable assets.
Frequently, those expecting to apply for Medicaid transfer assets to family members or move them to a trust to ensure their eligibility for benefits. The state typically reviews five years of financial records to look for questionable gifts and inappropriate transfers.
Significant transfers during those five years can lead to a penalty. The state determines how much an individual could have spent on their care and then converts that to a number of months. The applicant has to pay for their own care for that many months before Medicaid covers anything.
Planning well in advance makes it easier for people to access Medicaid coverage when they are financially vulnerable. Both those facing medical challenges and those preparing for retirement may need elder law support as they start planning to cover long-term care costs, and that’s okay.