It’s Never Too Late! That’s the answer I give many of our clients when they ask whether it is too late to apply for Medicaid to help pay their parent’s Nursing Home expenses. However, I guess the one big unfortunate exception to that statement is “It’s too late when they run out of money!” AND unfortunately, we see many of those situations. In most cases, it didn’t have to end that way!
(RANT!) The situation entitled, “Pay the Nursing Home until You Run Out of Money” has played out too many times. As a matter of fact, last week I saw it twice. When families pay until they run out of money, it’s too late! At this point we can’t help them. It’s like the movie “Groundhog Day”. We wake up and it happens again. I want to run out in the street and yell STOP!!!! I’m sure I could yell, but no one would listen. (I would probably end up locked up in a rubber room.) Hence, my only hope is to tell you – my faithful reader – in hopes that you will read, understand and maybe pass this information along to someone who is in this situation – BEFORE ALL THEIR MONEY IS GONE! (RANT OVER!)
How it Starts
Normally Mom or Dad sufferers a health event and goes to the hospital. After a few days, they may go to the Nursing Home for rehab. As we discussed in our last blog post, “Rehab – When Medicare Stops Paying”, Medicare will pay for up to 100 days. This is OK by you because the plan is for Mom to be in Rehab a month or two then go home. However, in Mom’s case it didn’t work out that way. After her stint in rehab, her doctor tells you that Mom will not be able to go home. She needs to stay in the Nursing Home. Medicare has quit paying. Now what?
You Start Paying Out of Pocket
Now you enter a phase called “Private Pay” which is a time when Mom starts paying for her care out of pocket. In Arkansas, the average monthly cost of care in a Nursing Home is $5,862. Average means that half the nursing homes charge less than this amount and half charge more than this. In our area of the state, they generally charge more.
Let’s keep the numbers simple. Assume that Mom is now a resident in one of these “average” Nursing Homes with a monthly cost of care equal to $5,862 per month. Assume her Social Security Check equals $862 per month. (I’m purposely leaving out a couple of small items to keep it simple). To calculate Mom’s monthly shortfall you would deduct her Social Security check amount from her monthly cost of care ($5,862 – 862 = $5,000). So, $5,000 per month is the amount of the check that she would have to write to the Nursing Home every month.
How long (you ask) would she have to write this massive monthly check to the Nursing Home? Unfortunately, we see people all the time that write it every month for years! (See RANT in paragraph 2 above ). Unless Momma takes action to protect some of her hard-earned money that she has remaining, she will probably spend ALL of her money (until broke) before the Nursing Home will apply for Medicaid benefits on her behalf. It doesn’t have to be that way. She could have protected much of her money. She just didn’t know her options and no one told her.
Momma ran smack into one of the other big rules of Medicaid. Paraphrased, this rule is, “You must have no more than $2,000 of countable assets before Medicaid will start paying your Nursing Home bill”. Let’s assume that when Momma went into the Nursing Home, she had the following assets.
- 2 Vehicles
- Pre-paid burial
- 20 acres outside of town
- $150,000 savings
- Personal items at home
When Momma applies for Medicaid, her assets would be categorized as follows:
Home (Value = $100,000)
1 vehicle (Mom’s car) (Value = $7,500)
Pre-paid burial (Value = $7,500)
Personal items at home (Value = $5,000)
1 vehicle (Dad’s old truck) (Value = $3,000)
20 acres outside of town (Value = $20,000)
Her exempt assets would not be counted “against her” for Medicaid qualification purposes. However, her home could be recouped by the State after her death to help the State recover some of the money that they paid in Medicaid benefits to offset her Nursing Home expenses.
Unless she did some good Medicaid Planning with an Elder Law Attorney, Momma’s countable assets however would have to be “spent down” to less than $2,000 before she could qualify for Medicaid. In her case, Dad’s old truck (Value $3,000) and the 20 acres of family land that had been in the family for four generations (Value $20,000, but high sentimental value) would have to be sold for fair market value.
The total proceeds of $173,000 would have to be spent monthly for her cost of care until Momma had less than $2,000 remaining. In her case $173,000 / $5,862 (average monthly nursing home expense) = 29.5 months. So, Mom’s family sells the land and Dad’s old truck, then dutifully writes a check to the Nursing Home for 29.5 months – until Mom is broke. Then she qualifies for Medicaid. To add insult to injury, after she dies, the State recoups (takes) her home.
It DIDN’T Have to End This Way!
Don’t think the above scenario is an exaggeration. We see this (and even worse) every week. The situation where Mom is a widow and much of her money and/or property that could have been saved was spent down is bad enough. However, even more tragic is the situation where Dad is still living. In many instances, we see couples spend down ALL of their money for the benefit of the one in the Nursing Home, leaving the one at home penniless! What if Dad spends down everything for Mom’s care and now he is broke? Then, all he has to support himself is his social security check? This tragic scenario happens way too often – just because people don’t know the facts.
Don’t let your family or family friend fall into the same situation. If you know of someone in the Nursing Home who is “spending down” then please, tell them about this blog. They can find it at arkelderlaw.com. If they don’t have a computer or internet connection, please print this blog post and give them a copy.
You can download a more detailed example by clicking the button below. Your PDF download will come complete with some sample actions that could have been taken in our scenario above.
Best wishes as you work to help the beloved Senior in your life.