Five Massachusetts Medicaid Myths

Most of my long term care consultations start with the client’s wish to protect assets from the nursing home.

Usually, the concern is based on inaccurate and confusing information from various sources. This write up addresses some of the most common misunderstandings regarding Medicaid. 

What is Medicaid?

It is a welfare program, based on financial and clinical needs, which pays for long term nursing home care, if you are eligible.

When you go into a nursing home to stay long term, you have three payment options:

• Pay privately – difficult for many of us
• You have long term care insurance that will cover some of the costs – not common
• You apply for Medicaid (in Massachusetts it is called “MassHealth”) to pay for it.

Here are five myths that I hear on a regular basis:

MYTH #1:   MEDICARE WILL PAY FOR MY NURSING HOME CARE
Medicare is a federal health insurance program that you are entitled to if you paid your taxes. You do not have to be financially needy. It covers medical expenses and rehabilitation (short term stays), but it does not pay for extended nursing home care.

MYTH #2:   THE NURSING HOME WILL TAKE MY HOUSE AND EVERYTHING I OWN BEFORE I CAN GET ON MEDICAID
Under Medicaid law, a person is permitted to own “exempt” property, which can include a primary residence and a car. In addition, if there is a spouse at home, that spouse is entitled to keep certain assets. Some assets are not counted by Medicaid. The trick comes in knowing the rules. 

MYTH #3:   I HAVE TO WAIT FIVE YEARS AFTER GIVING ANYTHING AWAY TO GET ON MEDICAID

There is a five year lookback period that Medicaid imposes for transfer of assets. Medicaid will impose a penalty period for transfers they deem as disqualifying. However, certain transfers are exempt from this penalty, including transfers to spouses and children with disabilities.

MYTH #4:  I CAN GIVE AWAY $16,000 PER YEAR UNDER MEDICAID RULES
This is an IRS rule not a Medicaid rule. It has no relevance in planning for Medicaid eligibility. In fact, under Medicaid law, it is a disqualifying transfer. The $16,000 IRS rule is for those people who have a taxable estate at death, and they are trying to reduce the value of their estate while they are alive to reduce their tax liability.

MYTH #5:   I CANNOT GIVE ANYTHING AWAY IF I WANT TO GET ON MEDICAID
The Medicaid rules provide that a person can be disqualified for giving away property or assets. 

But it depends on what is given away, to whom and when. Some asset transfers are not penalized under the Medicaid rules.