Don't Be Afraid of Medicaid

Jeremy Nachtigall • July 20, 2021

It’s true, Medicaid carries with it a negative stigma because people associate it with poverty. My mother used to say that if my grandmother knew that she was on Medicaid, she would have had a conniption. Let’s set the record straight: While Medicaid is, in fact, government-funded health insurance for the poor, it can also be used as a very effective tool for long-term care planning. As a Daily Money Manager, I have raised these issues with my clients who have assets they want to protect.


If you have been working with an elder law attorney, it’s very likely that you’ve had a discussion about qualifying for Medicaid and why you should use it to pay for your or your loved one’s long-term care. You’ve talked about the five-year lookback period. You’ve talked about restructuring of assets, irrevocable trusts, and income limits. 

These are all in addition to other strategies to, what I like to call, “artificially impoverish” the proposed Medicaid applicant. The fact is, if you structure your assets properly, Medicaid can pay for your LTC facility costs while your personal assets are not only protected but now can be used to enhance your standard of living.

 

You may have heard that the Medicaid Penalty Divisor increased in New Jersey from $357.67 to $361.20. But what is it and why does it matter? The penalty divisor is the average daily cost of a nursing home in a particular state. The penalty divisor is used to determine the amount of time that Medicaid will not pay for services. When an application is made for Medicaid coverage, 5 years of the applicant’s financial records are reviewed, which is also known as the “five-year lookback period”. All financial transfers that took place during the previous five year period are added up and the sum is then divided by the Medicaid Penalty Divisor.  For those who have properly done advanced planning, you will benefit from Medicaid coverage. For folks who have not properly prepared, they will have to self-fund their LTC for a period of time. On the bright side, this increase in the divisor is a good thing as it reduces the amount of time that you'll have to pay out of pocket.

 

Part of my Daily Money Manager practice includes working with clients and their attorneys on their documents and Medicaid applications because this is not something that you should do on your own. I strongly recommend engaging with an elder law attorney or other elder care professional who has experience with Medicaid applications. A mistake could have serious consequences, including ineligibility for benefits.

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