Uncover the Surprising Truth Behind Elder Care Planning: Medicaid's Role Explained

Welcome to another edition of We're Talking Money. This is a continuation of our series on Elder Care law. We did a great interview with Lisa Salinas Mondello, great Elder Care attorney, one of only 19 in the state of North Carolina, and we had such a good time doing the interview, but as we said, it turned into multiple shows.

Today we're focusing on Medicaid. It's one of the most misunderstood components to Estate Planning, and so many families struggle to plan correctly when it comes to Medicaid planning and asset protection. We're going to break it down for you today, so stay tuned. We'll be right back.

Let's talk about Medicaid for a minute, because that seems to be the word that scares everyone. They want it potentially, but they want to be sure that it doesn't mean spending down all of their hard-earned wealth before they can get it. There are ways to help people avoid spend down and still qualify. There are certain rules, lots of rules. Most people don't know them. That's where you come in. Take us through a little bit of why Medicaid shouldn't be the thing that scares everyone if you just simply plan.

So Medicaid is a payer of Last Resort, which means that if you needed nursing home and you didn't have more than two thousand dollars in assets, that they would pay the nursing home costs above what your income was, your Social Security, say, pension. Now that's important because folks sometimes are worried that if they go to a Medicaid facility, they're going to be in some horrible place, but that's not the case. So 90 percent of the facilities in our area are going to accept Medicaid because most folks are going to run out of money, so they're not gonna, and they're not going to move our loved one from Hall A to Hall B when they get Medicaid. So I want to start there.

Spend down, I think of as a ugly word, because everyone thinks they need to spend the money, but what we mean by spend down is not spend your money. We mean protect your money, protect it for your spouse. So if a person is married, they have more protections available to them than if they're single. So if we're talking about a married couple, for example, then we want to be thinking about putting a plan in place where real estate and cash assets and retirement can be protected, so that the spouse that lives in the community is not impoverished and the spouse that's placed gets the excellent care that they are entitled to.

And some people misunderstand that because spouses have, by law they have certain rights to assets. Spend down is not just an immediate conclusion, or shouldn't be. There are certain rights. Now, spend down is real, that can occur. So these protections that you talk about, very important, but should a spouse be concerned that if their significant other or their spouse goes into a nursing home, are they just immediately to be concerned with becoming destitute, or are there things that are just built into our law to protect them, or do they need you before that ever happens?

So the Medicaid manual is similar to the Internal Revenue code. If you read the code, you read the manual, there are Protections in there. Most folks aren't going to take the time to read and try to figure that out. So yes, the protections are there, but if my husband goes into a nursing home, I'm going to be expected to pay most of my assets to the nursing home for his support. How much you get to keep is going to be capped at a certain number, and the number is very low. So without protection planning, you will spend down your assets, and if you have real estate other than the primary residence, it will be expected to be sold and pay for care, anything outside of a personal residence.

So I think you're saying I can own my home, but if I have extended property, and particularly if it's not contiguous, it's probably on the selling block.

It's on the selling block. Cash, multiple Vehicles can all be up for grabs. So I always throw my husband Ed under the bus. So if Ed's in a nursing home and we own our house together and I die first, guess what, he inherits the house, and guess what, then has to be cashed in to pay for the nursing home. So most folks don't think about that. And there's also the risk of extended estate recovery after death, and so that's something else. That's a whole separate issue about what is Medicaid going to come back for later when the nursing home resident dies. And again, how your assets are structured is critical to avoid any type of estate recovery.

Lisa, before we came on the set we were talking about some of this potential legislation. It's, I believe, in the legislators' hands now. I believe what you were saying is that property in particular could be a huge risk right now because they could put liens on this property, meaning Medicaid, and so when the healthy spouse, for example, is finally deceased and the one that was in the nursing home is gone, they can actually come back, and there's clawbacks now where they can come get that property to help offset some of the cost of Medicaid.

Yes, and Medicaid's been saying that they could do that already, but they haven't actually, we haven't seen a case that they have done that, because I think when we do see that, it's going to be appealed. In North Carolina, but we have this transfer on death issue. So that means that if I have a piece of real estate and I wanted to pass to my children when I die, and I go in a nursing home, that asset, what they'd like to see happen is that the accountable asset from Medicaid, which would mean that they could have a lien on it. That could mean that you would never qualify for Medicaid and be expected to sell that real estate. So this is a really scary Time For Us in North Carolina, because so many people do own farmland and other property in this state, and that's been in their families. So this is a concern, and so pre-planning becomes more and more important, and again, those foundational documents are critical.

This very legislation came up years ago and they couldn't get it through. It's back.

It's back.

I think for reasons that maybe people aren't thinking about. One, our state and lots of States want to expand Medicaid. Well, Medicaid doesn't have the funding per se to just keep expanding, so there must be new Revenue sources that are in place or that will be added, put in place in order to create these revenues. Might this be one of them?

Yes, I think so. When I talk to folks, they say, well, I don't want Medicaid, that's not for me, I'm not going to use Medicaid, so I don't have to worry about this. But really we all have to worry about it, because if we trip and fall and bump our head and have a traumatic brain injury, we have a stroke, we get diagnosed with Parkinson's or dementia, we're all at risk. And while most of us might be able to sustain in a nursing home for some period of time, whether it be a month or a few years, how much can our estate handle, and then where does that leave our family if we outlive our money?

I think you're exactly right. A lot of people say, oh no, Medicaid's not for me, I'm never going to be on somebody else's dime, or I'm not going to be a burden to society. Well, the fact of the matter is, as taxpayers you pay into these systems throughout your life, and it's not necessarily really a bad thing to need it, and if you truly need it, that's what it's there for. I think what's so important for people to understand is that spending down your assets can happen much faster than you realize, particularly when it costs 100, 200, even 250 000 a year for private care. Those are big, big dollars. So you've got to have an estate, say, that's 5 million or above to truly be able to self-insure, and even then there's no guarantees.

And not everybody wants to go to a nursing home, how about that? So some of us want to stay home, right? All my clients do. So that means that if we want to qualify for a public benefit that helps us stay home, we have to have under two thousand dollars in assets. So if we haven't pre-planned and sheltered our assets or protected our assets in something that's within the rules, so nothing outside the rules, we're following the rules, then how do we stay in our home?

So if they're going to give us care to stay home and help us stay home, someone still has to mow the lawn, the new roof has to be put on, the refrigerator has to get fixed. So we won't be able to do that if our assets are below two thousand dollars. So we need to have trusts to hold money to allow us to be able to get a driver, have the lawn done, do all the things that keep our lives going, and allow Medicaid or public benefits to pay for those other things, and that can keep us in society. We don't want to go to a facility. That's the goal.

A lot of people, they never think about those things. So it might not be that they forget it, they just never thought about it. I've heard enough already to know that it's so important for everyone to get some planning. So if you're out there and you're wondering, should you be talking to an elder care attorney, we've probably already given you enough information that makes you look in the mirror and say, yes, I probably need to reach out to someone.

That's all for this episode, and I hope it's inspired you to take a look at Medicaid, whether it's for you or maybe a family member, and to better understand how Medicaid planning works and why it doesn't have to be so difficult. Now we're going to finalize the series with misconceptions, things that people just don't know when it comes to Elder Care law. That'll be coming out soon. In the meantime, please subscribe to our Channel, we so appreciate that, and make sure you ring the bell so that you never miss a great episode. You can also find us on Instagram, Twitter, Facebook, and of course omnistarfinancial.com. I'll see you next time on We're Talking Money.

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