Elder Law and Medicaid

As the population continues to age, and life expectancy continues to climb, more and more people are forced to deal with long term care issues. Since nursing home care currently exceeds $6,000 per month, on average, it is important to consider the options available to cover these expenses.

According to recent statistics, the fastest growing segment of the population in the United States is the age group over 80. In this population, approximately 40% will require long term care, and the average nursing home stay is about two and one half years. These figures are likely to continue to increase, as life expectancy continues to climb. Based on average figures, this means that 40% of the population, on average, may need to pay $180,000 or more, for long term care.

Many people are very concerned about avoiding estate taxes. These taxes currently impact less than 1% of the population. It is true that for that 1%, estate tax liability can be a significant expense. But the number of people it affects is relatively minute.

People are also typically very concerned about avoiding probate administration of their estate, following death. While the percentage of estates requiring probate is significantly higher than the people facing estate tax issues, the average cost of probate administration is relatively modest. For most estates, the total cost is less than $5,000.

Given that far more people face long term care than estate taxes and that the average cost of that care greatly exceeds the cost of probate administration, it is important to address these issues when planning your estate.

For many people, the strong preference is to remain in their own home, or in the home of a family member / caregiver, for as long as possible. There are many different factors and considerations involved in helping people to achieve this goal, and an in-depth discussion of this topic is beyond the scope of this brief article. Special attention should be given, however, to considerations or safety and security for the elder person, the need for dispensing medications or other medical treatment, the need on the part of the children / caregivers for assistance and or respite, and the prognosis for the elder person. There is a growing number of services and providers to assist people trying to stay in the community as long as possible. Please contact us if we can provide more specific advice or help.

Practical issues often dominate any discussion of elder law planning. While the focus is often solely on long term care and the payment of the same, seniors should not ignore the remainder of their estate planning. Properly drafted General Durable Power of Attorney forms are strongly recommended, at a minimum. Additional estate planning should also be considered, depending on the objectives of the client and the facts of their situation. Planning that fails to take these issues into consideration would be a disservice to the client and might leave them and their family members in an unfortunate situation.

Payment Options for Long Term Care

Long Term Care Insurance

There are many different insurance policies available to cover the cost of long term care. There are so many different options available that there is no way to adequately cover them in this brief article. Cost depends on age, medical condition, and the options chosen. As a general rule, the younger the person obtaining coverage, the healthier they are and the more limited the benefits, the lower the cost of the policy. People who can afford long term care coverage and are healthy enough to qualify for it will find this an excellent way to plan for payment of any necessary costs of care while avoiding significant depletion of their estate.

Some things to watch out for: You will ideally want a policy that pays for all benefits within 90 days of the start of care. You will want a policy that covers at least $100 per day and has a rider that covers inflation. Since the average nursing home stay is about 2.5 years, a policy that covers 3 years or more should be sufficient for most situations. Coverage that would pay for home care services or assisted care as opposed to nursing home care is also a good option to look for. More and more policies are starting to incorporate such provisions, as this care tends to be far less expensive than nursing home care.


Medicare coverage will typically pay for skilled nursing care and for rehabilitation services. Medicare payments generally are limited to 100 days, typically following at least 3 days of hospital care. Medicare will pay 100% of the costs of such care for 20 days and then a portion of the cost for days 20-100. Many seniors obtain supplemental Medicare coverage, (Medigap insurance), which covers the co-pay for days 20-100. If you can afford this coverage, it is generally a lower cost way to provide a source of payment for these costs.


Medicaid was designed to be a welfare program to ensure that the very poorest senior citizens were still able to get nursing home care. Medicaid began as a federally funded program, administered by the states. As costs have continued to escalate, states have been called on to shoulder a larger and growing portion of the total costs of the program. As the costs of long term care have increased and more and more people have needed such care, the program has become overburdened and it is now the fastest growing part of the federal budget. Since this situation is likely to continue for the foreseeable future, the program has been constantly scaled back and the rules have changed to make qualification more difficult.

Even if a person is able to qualify for Medicaid, there is no guarantee they will be able to find a “Medicaid bed” in a quality nursing home. This is largely because Medicaid pays about one half to two thirds of the amount that “private pay” patients pay. Nursing homes therefore have a strong financial incentive to limit the number of beds available for Medicaid patients, or to refuse such patients altogether. Some nursing homes have responded by requiring that patients “private pay” for a certain number of months before they can be moved to a Medicaid bed.

For this reason, it is very important, when investigating a facility, to find out what their policies are regarding Medicaid patients and whether the person will be guaranteed a bed, if their finances run out.

A person must meet income and asset requirements, in order to qualify for Medicaid. For most people, the income requirements are not an issue, since, if a person has sufficient monthly income to pay for the costs of their care, they will continue to do so, on a private pay basis. The person is allowed to have the following non-countable or exempt assets:

  1. a home worth less than $500,000;
  2. a vehicle of any value;
  3. personal and household belongings of any value;
  4. certain prepaid funeral goods and services;
  5. life insurance which has a cash value of less than $1,500;
  6. rental real estate, as long as the equity value is less than $6,000 and the property generates rental income in excess of 6% of the equity, after payment of expenses; and
  7. $2,000 in cash or equivalent assets.

Any assets in addition to the amounts specified above must be “spent down” before the person will qualify for Medicaid. In the case of a married couple, there is a “community spouse resource allowance” (CSRA), which modifies the above rules, to a certain extent. Essentially, the “community spouse”, or the person who does not require long term care, is allowed to keep a portion of the couple’s joint assets, without having to spend them down. The amount of the CSRA changes every year. There are a number of planning techniques that can be used to maximize the CSRA. People in this situation should contact us for more information.

People have come up with many schemes over the years to qualify for Medicaid while still preserving some of their assets for their children and other family members. The government has responded to these efforts in a variety of ways, and the qualification rules are frequently changed to make it more difficult for people to qualify for Medicaid by sheltering or otherwise disposing of their assets.

In 1997, a law was passed that imposed criminal sanctions for anyone who “for a fee knowingly and willfully counsels or assists an individual to dispose of assets (including by any transfer in trust) in order for the individual to become eligible for [Medicaid]…” A violation of this provision constituted a misdemeanor punishable by a fine of up to $10,000 and up to a year in jail. In September of 1998, this law was challenged in court, and the judge permanently enjoined the Attorney General from enforcing the law because it was found to be un-constitutional. There has been no further developments with regard to this law since then, and no efforts that I am aware of to change the law to make it Constitutional. Nevertheless, it shows the lengths that the government will go to, in order to try to limit the ability to manipulate the system.

One of the more successful ways in which the government has limited Medicaid planning is through the use of a “look back period.” Any transfers made by a person “for less than full market value” were deemed to be “divestments.” Any divestments taking place within the look back period rendered the person ineligible for Medicaid, for a period of time. The length of the divestment depended on the amount transferred and the average cost of nursing home care, at the time the person applied for Medicaid benefits. For example, if someone transferred $100,000 and applied for Medicaid when the average nursing home cost was $5,000 per month, they would be ineligible for benefits for a period of 20 months. Under former law, the divestment period started from the date of the divestment. In 2006, the law was changed to start the ineligibility period to the date of application. This eliminated a popular planning technique which previously allowed people to preserve substantial assets. The new law also increased the look back period to five years. The previous period had been three years.

With these changes, the government severely curtailed most of the popular planning techniques that had been used to qualify for Medicaid while still sheltering a substantial portion of their estate.

In 1993, the U.S. Government passed a law requiring every state to establish some form of “Medicaid recovery,” in an attempt to reimburse it for some of the Medicaid benefits it paid out. A wide variety of programs were developed, which were largely inefficient and ineffective at recovering much money, for the government. Michigan was the last state to establish a program, and it did so only in the face of continuing threats that the federal government would cut off all Medicaid funding if a program was not put in place.

Michigan’s program, which is relatively benign, as estate recovery goes, has not yet been approved by the federal government. Whether or not this will be done, or if additional restrictions will be imposed, remains to be seen. As it stands, Michigan has the right to impose a lien for the recovery of some of the Medicaid benefits paid out, provided there is a probate estate. In the event there is no probate estate, then there is currently no recovery imposed.

Given the significant potential expense of long term care, it is very important for someone who may be facing these issues to know the rules and to act in accordance with them. There has been an attempt, on a number of different fronts, to make this kind of planning unseemly. On the other hand, people are not made to feel guilty about taking income tax deductions they are entitled to. Elder law planning should be no different.

The rules in this area are very complex and they are subject to frequent change. If you have any questions regarding the current rules or how they apply to your specific situation, please contact us for a free consultation.