What Is Medicaid Spend-Down?
As a senior, you may find that you need to qualify for Medicaid at some point. If you did not plan for that possibility by including Medicaid planning in your estate plan you may encounter problems if you have managed to save even a small retirement nest egg. The Medicaid program offers important assistance to seniors; however, you must first meet the eligibility requirements in order to benefit from that assistance. If you do not initially qualify, you may find yourself facing Medicaid’s “spend-down” requirement. A Loveland Medicaid planning attorney at Zimmer Law Office explains what Medicaid spend-down is and how to avoid running afoul of it.
Will You Need Long-Term Care in the Future?
Americans are living much longer now than they did just a century ago. In fact, the average life expectancy has almost doubled in the last 100 years. Living longer after we retire, however, does not change the fact that the natural aging process still catches up to us eventually, potentially causing both physical and mental deterioration. At the time you retire (age 65), you will stand a 50 percent chance of needing LTC at some point in the future. Those odds continue to increase as you age. At age 85 your odds of needing LTC before you die will have increased to a 75 percent chance.
What Will LTC Cost You and How Will You Pay for It?
The reason your odds of needing LTC are important is that LTC is expensive. Nationwide, a year of LTC averaged over $100,000 in 2021. Ohio residents paid about the same, on average, for LTC in 2021. With an average length of stay of three years, your LTC bill could easily run over $300,000. Although you may be accustomed to counting on your health insurance to cover medical expenses, most health insurance policies specifically exclude LTC expenses. Likewise, although you may be looking forward to Medicare coverage for healthcare when you retire, Medicare will only cover LTC expenses under very narrow circumstances – and then for only a short period of time. For over half of all seniors currently in an LTC facility, the only viable option for help covering LTC expenses is Medicaid.
Qualifying for Medicaid
When you apply for Medicaid as a senior, both your income and the combined value of all your non-exempt assets will be considered. If your assets exceed the limit (an extremely low limit) your application will initially be denied. At this point, you will enter what is referred to as the “spend-down” period, during which you will be expected to “spend down” your assets until they reach the level at which you will qualify for benefits. In other words, you are expected to rely on your non-exempt assets (often your retirement nest egg) to cover your LTC expenses until those assets are depleted to the point where you meet the Medi-Cal asset limit requirements.
How Can I Protect My Assets from Medicaid Spend-Down?
Transferring assets to avoid the spend-down requirement is not an option because Medicaid also uses a five-year “look-back” rule that prevents such asset transfers. The good news is that by incorporating Medicaid planning into your overall estate plan early on you can protect your assets from the spend-down requirement. One common Medicaid planning tool that can help protect your assets is an irrevocable Medicaid trust. Assets transferred into such a trust remain out of the reach of the Medicaid “countable resources” eligibility requirements. Consult with an experienced Medicaid planning attorney to find out how you can use Medicaid planning tools and strategies to protect your assets.
Contact a Loveland Medicaid Planning Attorney
For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about Medicaid spend-down or incorporating Medicaid planning into your estate plan, contact an experienced Loveland Medicaid planning attorney at Zimmer Law Office by calling 513-721-1513 to schedule your appointment today.