Fact or Fiction: Mom has to spend down to $2,000.

Families often make one of their biggest decisions based on faulty information. We can separate the facts from Medicaid long-term care fiction.

To help cut through the clutter, we are discussing three of the biggest Medicaid myths that we hear repeated on a regular basis. This is our second installment in the series “Three Big Medicaid Myths.”

Medicaid Myth #2

  1.  Mom has to “spend down to $2,000” before she can qualify to receive Medicaid assistance. This one has a grain of truth to it. And like many partial truths, it sounds right. So, people needlessly begin spending all of their money, thinking this is what they have to do to qualify.
  1. To oversimplify the situation here, when one of a married couple applies for Medicaid, countable assets are divided equally (up to a point). The one going into the nursing home, referred to as the ‘institutionalized spouse,’ does have to spend his/her share of the assets down to $2,000.That is, unless the couple works with an Elder Law attorney to protect part of the spend-down amount. In a normal situation, over half of the money that would otherwise have to be spent down can be protected.
  1. Many times the at-home spouse, referred to as the ‘community spouse,’ doesn’t even know that he/she can keep half of the money. As a result, all the money is spent down to $2,000, resulting in destitution. Several years ago Congress passed a law to prevent this very thing from happening. Congress realized that spend-down would create a huge drain on the system if the at-home spouse had to spend every penny of savings for a sick spouse’s long-term care. Again, with proper planning, in a married couple situation, the community spouse can usually keep at least half of the assets, plus another half of what the institutionalized spouse would have had to spend down.
  1. Additionally, certain assets are exempt from having to be spent down. These assets include the family home, one car, prepaid burial and personal assets at home. These may be kept without division or spend-down.
  1. In the case of a single person, countable assets have to be spent down to $2,000 unless proper planning is done. Again, by working with an Elder Law attorney, at least half of the money that would otherwise have had to be spent down can usually be protected.
  1. Typically, a person going into a nursing home will not know what options to protect assets are available. This is not common knowledge and there is no quick and easy way to know this information. To make matters worse, those who do know these facts typically do not think to share them.
  1. The unfortunate truth here is that not only do families often spend way more money than required, but if there have been any uncompensated transfers the initial application may come back denied. This means that both families and nursing homes lose money. The nursing home will not be compensated for the months that it received no payment and was waiting on Medicaid reimbursement. Also, the family will owe the nursing home for several months while it was waiting on Medicaid to approve the application, which was subsequently denied.

If you have a loved one that is going to the nursing home soon, or one who is already there and is paying for care out-of-pocket, click here for a free workbook on nursing home crisis planning and give us a call at 501.843.9014 to arrange your free initial consultation. There may be actions that can be taken to save a substantial portion of assets.

The information provided on this blog is intended as general information only for a broad audience. It is not intended as legal advice and should not be acted upon as such. If any reader has questions or concerns about any matter mentioned herein, he/she should contact an Elder Law Attorney or other appropriate professional. If any reader has questions or suggestions about a future topic area that he/she would like to see discussed, please contact the author at doug@arkelderlaw.com.