Many older adults eventually turn to Medicare for crucial coverage as they age. Older adults who need to have nursing support in their homes or to move into nursing home facilities typically pay thousands of dollars per month for the assistance they require.
Medicare does not cover those costs, so people must apply for Medicaid if they don’t have personal resources available to cover all of those costs. Retired adults who have not previously planned to qualify for Medicaid benefits might conduct a few asset transfers in the months leading up to their applications. They may then be subject to a penalty before they are technically eligible for benefits.
How does the Medicaid program in Virginia calculate the penalties that apply for those who seek benefits with significant transfers in the five years leading up to their application process?
The penalty involves paying for care out of pocket
The Medicaid penalty for transfers and gifts is a reflection of someone’s financial behavior before they applied. Any transfer of resources that did not result in the applicant receiving the fair market value for the assets involved could contribute to the penalty the state imposes.
Professionals review the financial documents submitted by the applicant. They review any questionable transfers and gifts. They then quantify the value of those transfers. After determining how much the property was worth, they then convert that into a specific number of months of care costs.
The applicant has to pay for their own support needs for that number of months before Medicaid covers their expenses. Obviously, the penalty can be a very serious concern for those who have already diminished their holdings and do not have tens of thousands of dollars in personal resources to pay for a nursing home or in-home care.
The most effective way of avoiding the Medicaid penalty and obtaining benefits quickly when they become necessary is to plan for Medicaid before benefits are essential. If people have not already done so, creating an estate plan that addresses long-term care costs, or expanding an existing plan to consider care needs, can be a beneficial decision. Trusts and other pre-emptive asset transfers can help people qualify for Medicaid later in life when they need support.