Most older American adults primarily rely on Medicare to pay for their routine medical needs. However, those who require more intensive support may find that Medicare coverage is insufficient. Medicare does not cover long-term care costs, nursing home expenses or the cost of home health aides.
Those who require more hands-on support in their golden years may need to apply for Medicaid to cover those expenses. Unfortunately, applying for Medicaid can lead to a penalty that leaves an individual without the care they need for their health and safety.
When is a penalty a legitimate concern?
Recent gifts and transfers trigger penalties
Medicaid is a government insurance program that provides coverage based on need. When older adults apply for long-term care coverage through Medicaid, they are subject to a thorough financial review. Not only must they disclose their current income levels and countable assets, but they must also provide five years of financial records.
Any large gifts or transfers, including transfers to a trust, in the 60 months before a Medicaid application can trigger a penalty. The state totals the amount of the inappropriate gifts or transfers and then determines how many months of care cost roughly the same amount.
The older adult must then pay for their own care for a specific number of months before Medicaid coverage begins. Medicaid penalties leave people without support when they are already financially vulnerable and medically reliant on others. People preparing for retirement or in the early stages of medical decline may need to sit down to perform Medicaid planning.
Transfers and other financial moves conducted at least five years before applying for Medicaid are unlikely to trigger penalties. Proper Medicaid planning well in advance can help people get the benefits that they need for their health and safety in their golden years.