We receive many phone calls from potential clients who have run into challenges with applying for Medicaid in PA or the Medicaid application process and we see a number of recurring problems. The fewer of these issues in your case, the better. For what it is worth, we offer these suggestions hoping they will make your life easier in the event of a future need to apply for Medicaid long-term care benefits.
Don’t throw away old bank statements.
When reviewing an application for Medicaid long-term care benefits, most caseworkers at the County Assistance Offices require copies of complete bank statements for the immediate past 24 months, as well as the January and July statements going back for the remaining three years of the five-year lookback. It is a good idea to save copies of all financial statements, in paper form or digitally, as well as copies of deposited items and checks that are $500 or more and receipts for large expenditures. Most banks provide online access to old bank statements, but some only provide free access for a few years back, and some charge significant fees to provide copies of past bank statements and copies of old checks. Without these old statements the Medicaid application can be denied on the grounds of “failure to provide verification.”
Minimize cash withdrawals from the bank.
Some caseworkers at County Assistance Offices view cash withdrawals as suspect, particularly large cash withdrawals. Specifically, they can presume that the cash was gifted, and impose a period of Medicaid ineligibility. Gifting within the “5-year look-back” prior to a Medicaid application can give rise to a period of ineligibility for Medicaid benefits. We’ve done a clear outline on Asset Limits for Pennsylvania Medical Assistance (Medicaid) Long Term Care Benefits.
In most cases people do not save receipts for cash expenditures, so it can be very difficult to prove that the cash was not gifted or stashed by mom in the freezer. The law provides that the Medicaid applicant has the burden of proving eligibility. A great way to make a Medicaid application go smoothly is to reduce the number of cash withdrawals from bank accounts. It is best to use checks or a credit card and save receipts.
Do not pay home health aides with cash.
This may be a repeat of the prior point to an extent, but paying caregivers in cash is a very a common situation, and is therefore a recurring problem for those applying for Medicaid long-term care benefits in PA. When the caseworker at the County Assistance Office reviews the application, all they see are the cash withdrawals, not the payments to the caregivers.
Better approaches include:
- working with a homecare agency and pay them by check, saving copies of the company’s invoices, or
- if you must pay a friend, neighbor or relative, have a written caregiver agreement in place that was prepared by an elder law attorney and is signed before a Notary Public.
Document the need for care, document the payments, and make sure the amounts being paid are reasonable in amount. Even though it may seem like it costs more, paying aides through an agency can be preferable in the long run because the agency handles the taxes, insurance, training, and employment issues. If you’ve already paid the caregivers in cash, give us a call, we can help.
Get a written loan agreement in place before lending money to parents or advancing funds to help them.
If you loan money to parents, have a lawyer prepare a loan agreement that is dated and signed before a Notary Public. Often children loan money to parents expecting to be paid back from the eventual sale of the parent’s house, but there is rarely a written loan agreement in place.
The lack of a written loan agreement makes the Medicaid application more complicated because the caseworker needs to be certain that the payment to the child was a reimbursement, not a gift. Unless there is a pre-existing written loan agreement, the PA Department of Human Services can presume that the funds used to help the parent were given out of love and affection, as gifts, not as loans with the expectation of repayment.
We can overcome this presumption by having the right written loan agreement signed and notarized before funds are lent to a parent, and before items are purchased by a child for a parent.
Do not have a parent pay to build an in-law suite on your home without first considering how to structure the transaction.
It can be done, but there are a number of ways the financial arrangement can be structured, each with its own pros and cons. There are many complexities that can arise from this well-intended living arrangement, and this is definitely a transaction that can cause issues in the Medicaid application process.
One way to handle this is to structure it as a rental arrangement where the caregiver takes on the cost of building the addition and then accepts reasonable rent and payment for caregiving. Alternatively, the parent in need of caregiving could purchase a life estate in the caregiver child’s home for fair market value, or loan the funds to build the addition and then reduce the loan by the ongoing value of rent and caregiving services.
What seems like a simple transaction becomes complicated very quickly, and the financial arrangement is scrutinized carefully by the Pennsylvania Department of Human Services County Assistance Office during the process of applying for Medicaid long-term care benefits.
Substantial gifts should generally not be made if you are in ill health and likely to need nursing facility care.
Gifting assets away can cause periods of Medicaid ineligibility as has already been discussed. This issue remains a frequent problem for those who call our office for help, so we recommend the exercise of caution when gifting if you have a sense that nursing home care may be needed within the next 5 years.
There are exceptions for certain asset transfers, notably for gifts for the benefit of disabled children or to trusts for disabled persons, and where monthly gifting does not exceed $500 in aggregate. Gifting is the source of many denials of Medicaid long-term care benefits, so secure legal counsel if it appears nursing home placement and an application for Medicaid benefits could occur in the 5 years following a gift.
Children should not add parents to their own bank accounts as joint owners with the right of survivorship.
In the Medicaid application process, jointly owned bank accounts are presumed to be 100% owned by the parent applying for Medicaid long-term care benefits. Assets are potentially at risk of the Medicaid spend-down or the imposition of a transfer penalty if the child later moves the funds to his or her name alone. This presumption can be rebutted by proving that the child contributed the funds to the account. The best way to win this fight is to avoid it by not adding a parent to your own account as a joint owner.
Still overwhelmed and need help applying for Medicaid in PA?
We are here to help! The Medicaid application process can be confusing with many pitfalls. That’s why we strongly recommend hiring an experienced elder law attorney. Contact us with getting help applying for Medicaid and we will be happy to be your Medicaid guide.