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Medicaid is a healthcare program that is primarily funded by the U.S. federal government; however, it is administered by the individual states. Consequently, the eligibility guidelines and benefits offered can vary somewhat from one state to the next. Most states, including New Jersey, offer different categories of Medicaid, such as Medicaid for children, for pregnant women, and for the aged and disabled.
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People often confuse Medicaid and Medicare and/or use the two names interchangeably. Although both offer healthcare benefits, they are two very different programs. Like Medicaid, Medicare is funded by the U.S. government but is also administered by the federal government. Medicare is an entitlement program, meaning that as long as you paid into the program during your working years, you are automatically entitled to benefits when you turn 65. Medicaid, on the other hand, is a “needs based” program, meaning you must demonstrate a financial need for the benefits offered by the program.
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With each passing year, your odds of needing long-term care (LTC) increase noticeably. At retirement age (age 65) you already stand at least a 50 percent chance and by age 85 those odds will have increased to a 75 percent chance. As of 2016, the average monthly cost of LTC in the State of New Jersey was almost $11,000. With an average length of stay of three years, you could be facing a LTC bill of well over $300,000. Making matters worse is the fact that neither Medicare nor your basic health insurance coverage will likely cover LTC expenses, leaving you to pay out of pocket unless you are eligible for Medicaid.
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Each state develops its own eligibility requirements; however, they are similar from state to state. Aside from proving citizenship (or other legal status) and residency, the primary eligibility requirements for Medicaid involve demonstrating a need for benefits. To do that, you must have income and “countable resources” that do not exceed the program limits. For many seniors who did not anticipate the need to qualify for Medicaid, the countable resources (asset) limit presents a problem because in most states it is only $2,000 for an individual applicant.
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No. Some assets, such as a primary residence up to a certain equity limit, are exempt; however, it is very easy to exceed the asset limit if you failed to plan ahead. Each state decides what assets are exempt. Common examples of exempt assets include:
- Your primary residence
- Household goods and furnishings
- One vehicle
- Term life insurance
- Burial plot
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If your assets do exceed the limit, Medicaid will deny your application. At that point, you will enter what people commonly refer to as the Medicaid “spend-down” requirement. In essence, you will need to “spend-down” your assets until the value of your non-exempt assets is below the program limit at which point Medicaid will approve your application and begin covering your healthcare expenses.
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There was a time when this was an option; however, Medicaid imposed a five-year “look-back” rule that now prevents an applicant from transferring assets in anticipation of the need to qualify for Medicaid. The look-back rule allows Medicaid to review your finances for the five-year period leading up to your application. Any transfers for less than market value will likely be discounted and the value of the assets imputed back into your estate and Medicaid will impose a waiting period. The length of the waiting period is determined by dividing the amount of your excess assets by the average monthly cost of LTC in your area. For example, if you have $90,000 in excess assets, your assets exceed the limit by $88,000. If the average monthly cost of LTC in your area is $11,000, you would divide $88,000 by $11,000 which gives you a result of eight. Your waiting period would be eight months. During the waiting period, you will be expected to rely on your excess assets to cover your LTC expenses.
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Fortunately, the Medicaid spousal impoverishment rules prevent this from happening. If you need to enter a LTC facility, an allowance is made for your “community spouse” when calculating your eligibility to ensure that he/she is not left without any income and/or resources. Your spouse may be able to keep both resources and part of your monthly income, depending on your assets and your spouse’s income.
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Medicaid planning incorporates legal tools and strategies into your estate plan to protect your assets and ensure that you will be eligible for Medicaid benefits if you need them in the future. It is among the most important estate planning components if you cannot afford to cover LTC costs out of pocket because it protects your hard-earned assets and provides you with peace of mind during your retirement years.
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Contact Us
If you have additional questions about Medicaid planning in New Jersey, contact the experienced New Jersey Medicaid planning attorneys at Augulis Law Firm by calling 908-222-8803 to schedule your appointment today.
