Private-pay nursing home care costs between $9,500 and $12,000 per month in Montgomery, Bucks, and Philadelphia Counties. Some nursing facilities provide more intensive care, such as those with ventilators, and can cost over $22,000 per month. Without proper planning these expenses can quickly erase a lifetime of savings. We can help both married and single nursing home residents, and the spouse at home.
The good news is that federal and state laws set forth rules to follow in order to prevent spousal impoverishment. There are steps that can be taken to shelter assets from nursing home costs for the benefit of the spouse at home. At Gerhard & Gerhard, P.C. we will set forth various options for you at our initial conference. You select the plan that makes the best sense and we provide the ongoing advice needed to implement the plan.
All too often a well-meaning friend or nursing home representative advises a spouse to "spend-down half of the money" on nursing home care and then apply for benefits. This is normally bad advice, and a mistake that routinely costs the spouse at home thousands of dollars. Under applicable laws, the spouse at home clearly does not need to spend-down half of the couple's assets on nursing home costs.
Certain assets are exempt from the Medicaid spend-down. Of the couple's non-excluded assets, a portion is protected for the spouse at home by federal law, known as the "community spouse resource allowance." Our office will prepare and submit a form known as the "Resource Assessment Form" to the local County Assistance Office of the Pennsylvania Department of Human Services. The spousal share of assets is computed, with a minimum of $25,728 and a maximum of $128,640 (for 2020.)
If the spouse at home has low income and high shelter costs, additional income and assets can often be protected. Additional assets can also be protected through an appeal process in situations where the spouse at home has exceptional circumstances resulting in undue financial duress. At our initial consultation we will provide you with a computation of what income and assets the spouse at home can keep.
It is true that depending on the timing of events, the spouse at home may need to spend-down some resources in order to become eligible for long-term care benefits. But unless you have seriously delayed seeking advice, it is generally not true that the spend-down must be for nursing facility care alone. It is usually never too late for our advice to help protect some assets.
Spending-down excess resources on non-medical expenses at the wrong time can interfere with retroactive authorization of benefits. The furthest back an application can be approved retroactively is to the first day of the third month before the month in which the application for benefits is filed - if the applicant was financially and medically eligible.
Five-Year Look-back; Transfer Penalties
You may have heard about the "5-year look-back" and the "Medicaid transfer-penalty rules." When applying for Medical Assistance (Medicaid) long-term care benefits, the Pennsylvania Department of Human Resources reviews the applicant's finances (and those of the applicant's spouse) and looks through the couple's financial statements for gifts and certain asset transfers.
If gifts have occurred within the 5-year look-back, the Medicaid rules can impose a "transfer penalty" which is a period of ineligibility for long-term care benefits that begins when an applicant is otherwise eligible. With certain exceptions, nursing home residents can not give away all their money and apply for benefits asserting that they lack resources. A law known as the "Deficit Reduction Act of 2005" penalizes gifts that occurred as far back as 60 months prior to the filing of an application for Medicaid long-term care benefits.
For example, if an applicant gave away $10,000 to his son back in 2018, i.e., within the 5-year look-back, then that gift can result in 28 days of ineligibility for nursing home benefit for an application filed in 2020. The $10,000 gift is divided by the 2020 daily penalty divisor of $352.86/day, resulting in 28 days of ineligibility. If the nursing home's private pay rate is $330/day, then the $10,000 gift made years ago can result in an unpaid nursing home bill of about $9,240, beginning when the parent is otherwise spent-down and without resources. If gifts have occurred in the 5-year look-back, our lawyers can tell you ways to possibly reverse the transfer penalty or otherwise mitigate the problem.
If a nursing home bill remains unpaid due to a failed Medicaid application, then in Pennsylvania the nursing facility can sue the resident and the resident's spouse. In most cases the nursing home can also sue the nursing home resident's children under Pennsylvania's "filial support laws," regardless of fault. This potential exposure to liability exists even for the children who did not receive the gift giving rise to a transfer penalty. The way to avoid such lawsuits is to make sure the Medicaid application is approved in the first place. If there is a potential gifting problem, the best thing to do is to work with our office, before a bad situation gets worse. You should definitely should meet with an elder law attorney if there has been gifting in the 5-year look-back.
Exceptions to the Transfer Penalties
Sometimes the total gifting over the past 5-years is substantial, but the gifts were for a purpose "exclusively other than to qualify for Medicaid long-term care benefits." If benefits are denied in this situation, we can file an appeal to fight the denial, request a hardship waiver of the transfer penalty, or both. If we believe that an appeal is not likely to be successful, we will give you an honest assessment and provide other options.
There are additional exceptions to the gifting penalty rules. Notably, transfers between spouses are exempt and not penalized. Additionally, certain transfers to disabled individuals are exempt from the transfer penalty rules because public policy does not seek to impede gifts that benefit disabled persons.
Some gifts may be outright to disabled children, and sometimes these gifts need to be made to a trust for the sole benefit of a disabled person. In other cases, gifts to disabled children do not need to be in trust in order for a parent to qualify for long-term care benefits, but should be in trust in order to preserve the means-tested public benefits of the disabled person, such as SSI or Medical Assistance (Medicaid.)
Another major exception to the transfer penalty rules exists where the applicant's residence is transferred to a caregiver child. Public policy allows this exception in order to encourage family caregiving. This is known as the "caregiver's exception." We can help gather the documentation needed to prove that the exception applies. This exception is a win-win for the senior, caregiver-child and the Commonwealth of Pennsylvania since nursing home care is often avoided or minimized.
Never too Late
Planning ahead is ideal, but many times the Medicaid eligibility rules are not considered until after an unexpected nursing home placement occurs. Spousal protections are in the law for a reason, to prevent the community spouse from being impoverished. It is appropriate to follow-these rules and not spend-down more on nursing home costs than is necessary.
As far as gifting is concerned, parents do not normally know about the Medicaid gifting rules when helping out their children and grandchildren. Each case is different, but it is never too late for us to help.