Medicaid has strict asset rules that compel many applicants to “spend down” their assets before they can qualify for coverage. It is important to know what you can spend your money on without endangering Medicaid eligibility.
CAUTION: Many nursing homes will advise you to spend down your loved ones assets to $2,000 before applying for Medicaid. This ensures that they are paid the private rate, which is often higher than the Medicaid reimbursement rate. This can devastate your loved ones financial affairs and have a major impact on a well spouse (also known as the community spouse). In nearly every case, speaking to our firm can protect these assets and offer you legal options the nursing home is unable to provide.
In order to be eligible for Medicaid, applicants must have no more than $2,000 in “countable” assets (the dollar figure may be slightly more, depending on the state). In addition, Medicaid also has strict asset transfer rules. If an applicant transfers assets for less than market value, the applicant will be ineligible for Medicaid for a period of time. The current divestment penalty divisor for 2020 is $5,871.00. Applicants for Medicaid and their spouses may protect savings by spending them on non-countable assets.
Example: Jane Smith of Bald Knob, Arkansas, transfers $50,000 to her son, who lives in Sherwood, Arkansas in 2018. Ms. Smith will be ineligible for Medicaid for 8.5 months ($50,000 / $5,871). Her private pay rate of $7,000 per month for 9 months (rounding up) will be $63,000.00
A Medicaid applicant can spend down money on anything that would benefit the applicant. Following are examples of what a Medicaid applicant may be able to spend money on:
In the case of married couples, it is often important that any spend-down steps be taken only after the unhealthy spouse moves to a nursing home if this would affect the amount of money the community spouse would get to keep, called the community spouse’s resource allowance.
Each state has different requirements for spend down. Before making any spend down plans, consult with our team.
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