When it comes to transitioning from private pay to Medicaid for a nursing home resident or their responsible financial decision-makers, the most important things to think about are timing and planning. If you apply for Medicaid too early, you may find yourself denied for being over-resourced, leading to a drawn-out process of appeals and the need for subsequent Medicaid Applications. If you file too late, you risk a gap in coverage and the resident’s potential liability for the uncovered amount owed to the nursing facility.
So, what steps should be taken?
The first is compiling a list of all the nursing home resident’s current assets. Remember to include any asset with a value that can be liquidated, including bank accounts, life insurance policies with a cash surrender value, retirement accounts, and real property. How each of these assets is treated will be specific to the regulations in the state in which you are applying for benefits, so make sure to consult your state’s rules when determining what assets fall into this category. It is important to remember that not all funds will be as easy to access as those in a bank account. Retirement accounts and life insurance policies that must be surrendered take additional time. Each company has specific forms and requirements that must be met before the funds can be released. These are often countable resources for Medicaid eligibility purposes, so gaining access to the money is essential.
Once you have a list, add up the approximate dollar value of what the nursing home resident has in his or her name and determine how many months of private pay are possible before they would fall below the “resource limit”. That is the amount of money that each state Medicaid program has determined a Medicaid recipient must be below in order to qualify for long-term care benefits. Utilizing this money for the resident’s benefit is part of what is known as a “spend down”. To avoid issues such as an asset transfer penalty, make sure the resources are spent down in a Medicaid-compliant manner. Paying privately for care at a nursing home facility is one such way to ensure that the funds are spent properly.
It can be complicated to keep track of the balance in each account. If the nursing home resident has several bank accounts, consider keeping only one open and transferring all the available funds into a single account while closing the rest. That way, it is easier to see what the exact balance is while you are making private payments to the nursing facility during the spend down. Remember, the resource limit is not for each account; it is cumulative. If you are trying to balance several open accounts, it is easy to lose track of exactly where the nursing home resident’s finances stand. Having a singular account where all funds from checking, savings, retirement, and liquidated life insurance policies are deposited simplifies the process and the transition from private pay to Medicaid.
If, after reviewing the resident’s finances, you determine that they have, for example, three months of resources left to pay the nursing facility privately, you will want to plan on having the Medicaid Application ready to file in the same month the assets will drop below your state’s resource limit. This will preserve the Medicaid need date.
Why is that important? In many states, the processing time for Medicaid Applications can be substantial. You may have a Medicaid need date in January, and you file the Medicaid Application by January 31. However, in all likelihood, you will receive questions, known as Requests for Information, from your state’s Medicaid agency. These can include asking for additional financial statements, the reasons for transactions noted in bank accounts, or proof that the resident does not hold a financial interest in another asset. This can be a time-consuming process, and you may not receive final approval on the Medicaid Application for several months. Does that mean there will be a gap in coverage? If you have planned carefully and made private payments to bring the applicant’s assets below the resource limit at the time the Medicaid Application was filed, then the approval will date back to the month of filing. For faster processing, consider submitting as much documentation with the Medicaid Application as possible. For example, provide five years of statements on each account that the resident had open during that period (and proof of closure if no longer open), and show that the cumulative balance is below the resource limit. The more information you can provide from the beginning of the process, the greater the chance you will have for a faster approval.
It is never too early to start planning. Even if the nursing home resident has substantial assets with the ability to pay privately for several months, the sooner you start to organize those assets and determine when you will need long-term care Medicaid approved, the more likely you are to successfully transition from private pay to Medicaid.
