This. If you want to manipulate the system, then you ensure that your parents are effectively bankrupt when they are ready to move into a home. Asset transfers to kids who will then slowly sell them off to cover the cost of the home that is NOT covered by a combination of medicare, medicaid and social security checks.
Disgusting, manipulative, etc. - yes. Effective as hell in keeping the parents in a nicer home without sucking all of the cash out of the estate too fast depending on life expectancy - also true.
After watching family elders deal with nursing homes, the “Mom’s teeth are worn down - time to find her an ice floe” solution might have been more humane.
As a card-carrying boomer, fear and refuse to join the AARP because of their lobbying. “We want the world and we want it now!” was fine as a lyric but not as a political goal.
The lookback period is now five years, courtesy of the Deficit Reduction Act of 2005–if mamma is already going downhill, it may already be way too late.
In the OP’s case, the relevant details are going to be about the trust itself: is it irrevocable or no? when was it funded? who is the trustee, and what does the trust document say about the purposes and appropriate uses of the income and assets? If an irrevocable trust was set up and funded many years ago, it may be perfectly adequate to shelter some or all of its assets; for example, different rules apply to trusts established prior to August 1993, courtesy of the Omnibus Budget Reconciliation Act of 1993, and there used to be such a thing as a Medicaid Qualifying Trust. The OP and his mother need to discuss the details of the specific trust at issue and the specific details of his mother’s state regulations with an experienced attorney before making any decisions at all, including any decision to try to transfer trust assets at this late date.
I believe the 5 year lookback period is only going to start when Medicaid is asked to start paying out funds, isn’t it? So if she needs nursing home care two years from now and has adequate funds for another three years for nursing home care so asks for Medicaid 5 years from now there shouldn’t be a problem, correct?
Yes, that’s how it was explained to us. If you want to give something away, and think you can pay for five years of nursing home care yourself, you’re fine. Give it away.
We just formed a trust this fall, so not all trusts are bad. My husband and I both retired from the state, so we have pensions. I taught for twenty years in southern Illinois, so I don’t get Social Security, and since my pension is based on the salary from my small, rural district, it’s a pretty small pension. My husband’s is a little better.
The lawyer went through our finances and said we could squeak by if one of us needed nursing home care, but if we both did (which, based on our health right now will be happening), we will be bankrupt pretty quickly. My hope is that one of us can stay out of the nursing home for five years so that the trust can take control of some of our assets, or that we have enough in our retirement accounts to drain them and pay for the five years before we have to go to Medicaid, but the cost of skilled nursing care is high enough here, even in just adequate homes, nothing special or nice, that I’m not sure we can get five years at $10,000 or $12,000 a month out of our retirement. I think those were the numbers I’ve been hearing, and they are certainly not going to go down.
I don’t know who actually does the looking back. I have a friend who gave away some things when her grandmother went into a nursing home, and the grandmother went right on Medicaid. The friend’s mother may need care shortly, and my friend is giving away items and cash of her mother’s, and I bet nothing will happen at all about going right on Medicaid. So I don’t know if the facility does it, and some are just lax, or if Medicaid does it, and a lot slips through. I guess it’s a gamble, though, and you just have to hope you slip through.
Some of it, I’m sure , is based on how much money is given away over what period of time. I would think they look at grandma giving away $10K over 5 years to her 10 grandchildren in birthday and Christmas gifts differently than Grandma signing her $500K house to the same grandchildren a year before applying for Medicaid.
The look-back period starts when Medicaid is asked to start paying. If she doesn’t apply for Medicaid until five and a half years after the transfer, there’s no problem. If she needs Medicaid four years and eleven months after the transfer, there could be a very large problem, depending on how the state chooses to view the transfer and how much money is involved. (The exact language is “in the 60 months before the first month in which the individual requests coverage of long term care expenses to begin,” so if she needs coverage starting this month [Jan. 2017], any transfer after Dec. 31, 2011, has the potential for causing a penalty.)
The penalty period starts with the date the applicant would otherwise be eligible for payment. For example, if the transfer happened in Jan. 2012, she needs Medicaid to start paying in Jan. 2017 (maybe her money ran out a little early) and the state determines that $100,000 was improperly transferred, the penalty will be eighteen months, and Medicaid won’t actually start paying until July 2018. She and/or somebody else in her family will have to find the money to tide her over until then.
(Different states use different amounts, but the current formula in Kansas for penalty periods is: [Total Uncompensated Value] / $183.15 = Number of days penalty, so
$100,000 / $183.15 = 546 days penalty in which she is eligible for Medicaid, medically requires care, and Medicaid isn’t going to pay)
There is no upper limit on the penalty period; if a very large sum is deemed improperly transferred, the penalty period could far exceed her possible lifespan.
The state Medicaid program will do the review. For “things,” it’s pretty hard to prove anything; most social workers, though, will be checking bank statements and the like, and unexplained cash withdrawals of any size are going to raise eyebrows.
Of course, it will depend somewhat on whether the case is assigned to somebody with 500 other cases on her desk, each getting only cursory review, or somebody looking to make a mark by finding reasons to delay Medicaid having to pay.
Yeah. I imagine some are better than others, but you definitely want to avoid them if at all possible, including spending down the parents’ savings. That’s what the savings are for, after all.
My in-laws would most likely wind up in such a facility should they ever not be able to manage on their own, as they have no savings whatsoever and nobody in the family can afford thousands of dollars a month for a nicer place. A local friend’s mother is in such a place and her retirement savings (IRA or whatever) were completely wiped out after several years there - at about 6K a month.
If your parents really want to avoid wiping out their savings, and are willing to risk winding up in a Medicaid-paid home, they could in theory transfer all their assets to you or something like that. It as to be done well before the need actually arises of course. I don’t personally recommend this.
To the extent the Medicaid spend-down surprises or bothers people, I think it’s because Medicare doesn’t require it. A $140,000 operation paid for by Medicare costs the body politic the same as $140,000 of nursing home care, after all, but we do not require an asset spend-down of any kind before covering the cost of surgery. One could reasonably ask why someone who needs a new heart paid for by the government gets to leave an inheritance behind, while someone who needs routine daily care does not.
Policies differ, of course, but I’ll mention that the LT care insurance offered to federal employees through our employment does not pay for unlimited time in a nursing home either. One buys a specific amount of coverage, and it pays until it runs out.
My grandmother is in a relatively nice place at about 6500 a month, and everything of hers is gone now - savings, property, most of the kids have given back their inheritances to keep funding her stay. There have been a couple of loans and a double mortgage, and now we’re at the point where we’ll have to move her into Medicaid care in the next few months - we keep trying to drag it out because she’s in a memory unit and even switching rooms was an awful experience… but the money’s just not there any more.
No one planned for her to need that level of care for this long (she’s over 95 now, and physically totally healthy). She was always supposed to stay at home with a nurse and retired family members to care for her until she died, but when her mind went, we couldn’t manage her. She had so much saved away too - it’s just unreal. It’s been about 5 years, and ALL the money is gone, and more thrown in after.
The most depressing part is that she was so happy to have saved so much to give to her kids and grandkids. At least she doesn’t know it’s gone and that we’re all worse off now than we were before. It would kill her to know she was a financial burden after all this time.
The other sad thing is that looking at this, all my aunts and uncles (boomers, retired) have decided fuck it. They’ve spent through their savings for my grandmother, and they don’t have much of an income from retirement benefits, but they’re spending it like water as it comes in. They all say now even when grandmother dies, there’s no point in saving anything for themselves or their own kids if a home’s gonna take it all in a few years, so they’ll just go out in the woods and shoot themselves in the head once they hit 85 or if they get a bad diagnosis. It’s nuts.
And the answer to that is simple- Medicaid is meant to provide for poor people, while Medicare is meant as health insurance for those collecting Social Security. A 35 year old with no insurance who earns too much for Medicaid will not even get that $140K operation unless it is lifesaving ( and many operations are not- knee replacement for example).
None of it really makes sense - but there are a couple of issues that need to be resolved if we decide that all long-term care costs should be covered by Medicaid
Taxes will have to be raised, because Medicaid will be covering more care. Lots of people do Medicaid planning, but lots don’t have a chance to and others don’t for other reasons.* Right now, those who don’t get rid of their assets for whatever reason have to pay for their own long-term care until they qualify for Medicaid. Whether their assets consist of a house worth $75K or if they are Warren Buffett/Michael Bloomberg.
Once you take care of that ,you’re going to have a different problem. Instead of wondering why the government will pay $140K for an operation, but not $140K for a nursing home, people will be instead be wondering why a millionaire is getting $140K a year to pay for long term , but that uninsured 35 year old won’t get any care he can’t pay for unless it’s an emergency.
Now that problem can be solved too - but I don’t see it happening anytime soon.
*Funny thing I’ve noticed - everyone thinks anyone who had a little more than they did is a thief . A person who gave one house to his kids 6 years ago so Medicaid would pay for long term care thinks the guy who gave *two *houses to his kids is a thief.
A guy who only had $10K to give his kids thinks both of the others are thieves, and a guy who didn’t need to do any planning cause he never had any assets thinks they’re all thieves.
Well, saying that the programs are different is less an answer than a restatement of the question: Why are the programs different?
Perhaps more to the point, why is our moral intuition about the programs so different? Someone receiving $140,000 in long-term care from the government while passing along an inheritance is immediately and viscerally perceived as unjust by many people (see upthread, for instance), but no one ever seems to feel the same objection to someone else who has received the same amount in surgical care from the government doing so. Why does the idea of Warren Buffett receiving publicly-funded long-term care bother us so much, while Warren Buffett receiving publicly-funded acute care does not?
For the record, I’m not trying to lead into some gotcha. I genuinely don’t have an answer.
Most long-term care isn’t really “medical” care; it’s custodial care, such as food and shelter and somebody to do the laundry and help with bathing. (Most nursing home residents, even those on Medicaid, actually receive their medical care, such as prescription medications and hospitalization expenses, through Medicare.) So, you’re basically asking “why does the idea of Warren Buffett receiving publicly-funded food and housing bother us so much?”
IMO slask2k nailed the acute/long-term care dichotomy. With one additional factor: Luck vs destiny.
Not everybody needs a heart bypass. Substantially everyone who lives long enough needs custodial care.
Right now in our acute care universe we’re already getting to the place where, unlike say 1950, darn near everybody eats up a huge dollop of acute/chronic medical care in their final years.
In 1950 (or 1930 or 1970; the exact date isn’t the point) many diseases were one-and-done. The most current medicine could do was keep you sorta comfortable while nature took its course. In 2017 we have lots of ways to expensively intervene in nearly every disease. In some cases curing, in other cases providing many extra years of good quality life. And sadly, in some cases, just rearranging the deck chairs on a badly-holed Titanic taking on water quickly.
We are now confronting the social issue of how do we deliver universal comprehensive care when that means signing up for spending WAG $200-500K on damn near each and every citizen in their later years. Overall, we can’t each take out more than we each put in to the public / private insurance pool. And that number is bigger than maybe 80% of Americans will ever put in.
Piling long term care onto this already overloaded situation would be like throwing a drowning man an anvil.
We might as a society be morally better providing more nursing home care and less late life hoped-for-curative care. Instead focus on palliative care and the basics of nursing homes: food, shelter, cleanliness, companionship.
But so far we (US civil & political society) are not really willing to have that convo about managing the collective boat we’re all collectively in. Much as Lasciel just above explains how her fairly cohesive and rational extended family wasn’t ready to have this convo about a single individual loved one.
Richard Lamm, governor of Colorado in the 1980s, became known as “Governor Gloom” for expressing the same concerns as your first paragraph, and advocating an approach rather a bit more aggressive than your last paragraph: