The Problems Facing Long-Term Care and Medicaid Recipients

As I previously discussed, many senior citizens do not have the means to provide for themselves or the means to purchase long-term care. This is a problem for senior citizens; therefore, many seniors have come to rely on assistance from Medicaid to provide them with the support they need. Recently, changes in the law may prevent these senior citizens from utilizing Medicaid as a means to provide for their livelihood. In 2005, Congress passed the Deficit Reduction Act (DRA), which makes it more difficult to qualify for Medicaid. Senior citizens and their families are now faced with a difficult realty. Without Medicaid, these seniors citizens will not have the financial resources to support themselves or pay for expenses they incur at nursing homes. In addition, these same people do not know that their current health care coverage does not cover this type of expense. Furthermore, as little as 17% of senior citizens have any sort of plan to provide support for them in their old age.

Congress passed this legislation with one goal in mind: reduce the cost of Medicaid. With the increase in the senior citizen population, the costs of Medicaid have increased. The law itself is intricate. It prevents the use of gifts to qualify for Medicaid. Unfortunately, this has the effect of preventing senior citizens from making legitimate gifts to their family. If these individuals do make gifts, then it could jeopardize their access to Medicaid. The law also prevents nursing homes from removing residents who are waiting for their Medicaid benefits. However, this could activate the “filial responsibility” law, which requires family members to provide for their elderly family members if that family has the means to support their family member.

The law also affects the ability of a senior citizen to create alternative estate plans to qualify for Medicaid. The DRA now requires a senior citizen to take into account the equity of his house as part of his Medicaid eligibility limits, but only if the house exceeds $500,000. In addition, a senior citizen cannot make a personal loan to a family member and forgive the loan to reduce their income. Now, the lender cannot forgive the loan, it must be an actual loan with repayment. 

With the DRA in effect, senior citizens now face a number of challenges in qualifying for Medicaid. Senior citizens might want to consider purchasing long-term care protection, and include it in their estate plan.

See Shawn Britt, What to Know About Long-Term Care and Medicaid, The Wealth Channel, 2011.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.