Page Reviewed / Updated - October 14, 2020
Expert Reviewed By: Joshua Iversen, President, Syzygy Financial LLC
To determine one's Medicaid eligibility or to find a Medicaid planner, please use the free service provided by the American Council on Aging. To better understand the services Medicaid Planners provide and when it is appropriate or necessary to use their services, please continue reading...
Medicaid eligibility is very complex. The rules change frequently. They differ in each state, and they differ by program within each state. In addition, the application is time consuming, and the review process is lengthy. The consequences of being denied by Medicaid are severe and can negatively impact the comfort, happiness, and even the health of the individual applying and their entire family.
Medicaid Planners help clients structure their financial resources and prepare documentation to ensure the best possibility of being accepted into the Medicaid program. They create trusts, manage asset transfers, and convert countable assets into exempt assets to ensure eligibility and preserve a family's resources. They can also protect a family home from Medicaid recovery. In addition, they manage finances to ensure a healthy spouse (a non-applicant spouse) has adequate income and resources to continue living independently during and after the time when their partner is receiving care assistance.
Many families wonder if it is really necessary to hire a Medicaid planner. There are two ways to answer this question. First, there are public employees that offer free assistance, so hiring a Medicaid Planner is not always necessary. However, not everyone is qualified to receive free assistance.
For those who don't qualify for free assistance, it is not absolutely necessary that they retain the services of a Medicaid Planning professional. However, in many situations it is prudent, cost-effective, and strongly advised. The decision should be based on each family's specific situation.
As an example, in many states, one Medicaid eligibility factor is the value of one’s countable assets. The limit is approximately $2,000 for a single applicant. It is not necessary to hire a planner if the applicant has less than $2,000 in countable assets. In addition, free application assistance would be available.
If the applicant has countable assets between $2,000 and $15,000 (or $30,000 if married), one can probably avoid retaining paid Medicaid planning help by engaging in self-planning. There is a simple option called an irrevocable funeral trust. This is essentially prepaying a funeral and all the associated expenses. The family simply allocates the amount of money by which they are over the Medicaid limit to the irrevocable funeral trust. Medicaid no longer considers that money a "countable asset" and they are no longer over the Medicaid limit. Learn more about this option. If the applicant has countable assets over $15,000 or $30,000 if married, then it is probably prudent to retain a Medicaid planner, as the planning techniques become considerably more complicated.
Having countable assets over the limit is just one reason a family may elect to hire a Medicaid planner. Being over the income limit is another common reason. Similar to the irrevocable funeral trust strategy described above, there are approaches that can be taken when the applicant has income in excess of the limit, but is still unable to afford their cost of care.
Here, we examine the question of whether to work with a Medicaid planner in four different situations that are common among families with aging loved ones.
When Only One Spouse Requires Care
The cost of caring for one spouse can very quickly exceed a couple’s total resources. That said, the couple’s primary home is exempt from Medicaid’s asset limit, given one of the spouses remains living in the home. In addition, to protect the healthy spouse financially, there are spousal impoverishment rules in place for couples in which one spouse is applying for nursing home Medicaid or a home and community based services Medicaid waiver. This includes both an income allowance and a resource allowance for the non-applicant spouse. This separation of resources and allocation of income is necessary. And is unfortunately sometimes complicated. For couples in which just one spouse is applying for regular Medicaid, the spousal impoverishment rules do not apply. In this case, it is vital to put in place planning strategies to protect assets for the non-applicant spouse. Given the critical nature of acceptance into Medicaid, the use of a Planner is advised in both cases.
When Both Spouses Require Care
The long term care costs for two individuals can bankrupt most American families very quickly. Without one spouse able to care for the other, the financial and caregiving burdens on the adult children created by a Medicaid denial are substantial. They can be overwhelming when the adult children have children of their own. Given the critical nature of acceptance into Medicaid and the lack of a healthy spouse to engage in planning, the use of a Medicaid Planner is recommended.
A Healthy Couple Doing Long Term Planning
For healthy families wishing to preserve some of their assets for their children and grandchildren, working with a planner is helpful, but not critical. Without an immediate need for care, families are more likely to be able to plan themselves without professional guidance. It is worth noting that a mistake in planning can impact eligibility for as long as 5 years (2.5 years in California). This is because Medicaid has a look-back period. If one is not confident in their family's ability to manage some complex legal and financial techniques, using a planner is advised.
A Single Person with no Assets or Income (regardless of their health)
In this scenario, because of the severe financial hardship experienced by the individual, they should be able to gain acceptance into Medicaid without assistance. This is provided there are no procedural errors. One might consider getting assistance from a social services agency with Medicaid document preparation. But hiring a planning professional is not necessary.
There are a wide variety of costs associated with engaging a Medicaid Planner. This depends on the type of Planner as well as the needs of the applicant. With some planners, there are no costs associated with their services. Though applicants should be cautious in this situation). At the other end of the spectrum are Elderlaw Attorneys whose fees can be as low as $3,000 and as high as $10,000. This is a high cost for a family that is struggling to pay for care. However, as attorneys will point out, the cost is often less than the cost of one month of nursing home care. The American Council on Aging website provides a good in-depth analysis of the types of Medicaid Planners and their associated fees.
Most Medicaid planners start the process with a free consultation in which they will discuss the health status and financial resources of the individual who is applying, or will someday apply, for Medicaid. They establish the likelihood of success, as well as the positive impact they can have on preserving a client’s assets. They use this information to determine whether to accept the prospective client and to provide a cost estimate for their services.
Once engaged with a client, several weeks are typically required for the collection of information and formal analysis of the family’s assets. A plan is built, discussed, and modified as needed. Putting the plan into action can take longer. Depending on the strategy, it can take several weeks or months, even up to 6 months in some cases. In situations where there is an immediate need for Medicaid care, the Medicaid application documentation can be prepared concurrent with the execution of the plan. In some cases, Medicaid coverage can even be made retroactive.
A category of professionals called Life Resource Planners, or sometimes Eldercare Resource Planners, offer an alternative to traditional Medicaid planning. These advisors take a larger, holistic view of how to help families plan for paying for aging care. While Medicaid Planners are very focused on the task of helping families qualify for Medicaid, Life Resource Planners also look to see what other options exist and are available. As with Medicaid Planning professionals, their fees must be paid for out-of-pocket. However, those fees are substantially lower. Eldercare Resource Planners typically charge 50% - 75% less than Medicaid Planners. Learn more.