Medicare does not pay for indefinite, long-term care like custodial care. In a facility, Medicare only pays for skilled nursing and rehabilitation services following a hospital stay of at least three days. Medicare will pay 100% for the first 20 days. After that, the patient pays a co-insurance of $185.50 per day (in 2021), and Medicare pays the difference. Medicare provides this coverage only up to 100 days.
In general, the sooner MaineCare (Maine’s Medicaid program) planning begins, the better. Although the MaineCare rules allow an applicant and a spouse to retain some assets, planning ahead for the potential need for long-term care can provide more protection. There is also a transfer penalty imposed for assets transferred within the five-year lookback. Starting that “five-year clock” before a crisis occurs may be beneficial to you and your family.
Our clients are often told to apply for MaineCare right away, but depending on the circumstances, this could negatively impact the applicant’s eligibility. Ensuring financial eligibility prior to applying can save time, frustration, and money!
Here is an example: Family applies for MaineCare for mom in June 2021. Family provides the Department of Health and Human Services (DHHS) five years of financial verification as required. DHHS finds that mom gave each of her three children $15,000 in July 2016. Because of this gift, DHHS denies mom MaineCare coverage and imposes a transfer penalty of 5.3 months. Instead, the family could have waited until August 1st to apply so that the gifts would be outside the five-year lookback. Mom could have been approved for MaineCare beginning as early as June 1 instead of paying for her long-term care services through November.
First, failure to disclose assets or transfers to DHHS constitutes Medicaid fraud, which is a criminal offense. Second, it doesn’t really work. When a MaineCare application is submitted, DHHS requests all financial statements for all accounts within the look-back period. DHHS also requests verification of transactions including check deposits and withdrawals and cash deposits and withdrawals. If there are transactions that cannot be explained, DHHS will impose a transfer penalty.
Clients often think they can transfer $15,000 per year to each child without a transfer penalty. The MaineCare long-term care rules regarding gifting are not the same as the IRS tax rules regarding gifting. Any gifts or transfers over $500 per calendar quarter may impact your future eligibility for MaineCare benefits.
The most frequent trust administration mistakes we see that impact MaineCare eligibility are the following:
The rules do not allow a credit for outstanding loans, bills or debts. All debts (credit card bills, medical bills, loans, mortgages, etc.) should be paid off prior to applying for MaineCare benefits.
Pre-paid funeral and burial contracts (often called mortuary trusts) are treated as non-countable assets for MaineCare eligibility as long as the value of the mortuary trust is less than $12,000 per person and the arrangement is irrevocable.
If you pay a family member for caregiving services or for rent payments, it is important to create a written agreement. The MaineCare rules treat any payments to family members as gifts subject to a transfer penalty unless the payments were made pursuant to a legally enforceable contract. Caregiving services must also be approved by a health care provider.
Updated estate planning documents can be crucial in MaineCare planning. If you are unable to sign hospital discharge forms, an application for a facility, or you are unable to request financial documentation, your family will need the authority to do so on your behalf. If you do not have a legally effective financial power of attorney or advance health care directive, your family may be required to go to court to get that authority.
Additionally, spouses usually have wills leaving their estates to the other. However, if a community spouse dies and leaves all assets to the institutionalized spouse, the institutionalized spouse will be disqualified from MaineCare until all of the inheritance is spent down. Because of Maine’s elective share statute, the community spouse can’t just disinherit the spouse to avoid this. The community spouse should sign a new will with a spousal trust for long-term care purposes.