Little Known Risks For Do-It-Yourself Medicaid Applications

Is a Texas nursing home a possibility for you or someone you care about? Then you’ll likely find yourself having to file Medicaid application sooner or later. Why? Because outrageous monthly nursing home costs can lead to financial ruin. The Medicaid program is the only federal program that helps pay long-term care nursing home costs.

You may be tempted to tackle the nursing home Medicaid application yourself. After all, you can find information on the Internet. And, that nice lady at the nursing homes says she can help you process your application. And an experienced elder law attorney can be expensive, right?

You might be able to convince yourself you can successfully prepare your own Medicaid application. But, you might be making a mistake… and a costly one at that.

You may feel that comment is self-serving. I get it. I’m an attorney who helps people qualify for Medicaid benefits. Yes, I have a vested interest in convincing you to hire me. No doubt about it. But your stake in the outcome is far greater than mine.

You have more to lose. If I fail to convince you to hire me, I lose the one-time fee associated with the guidance you would otherwise get. But, if you fail to become eligible for Medicaid nursing home benefits, you stand to lose thousands of dollars each and every month.

Routinely I get calls from families who tried to protect assets on their own. An aging parent or spouse is moved to the nursing home. The family does their research. They talk with friends and neighbors. Some have read a how-to guide on Medicaid asset protection. They try to understand the rules as best they can. Then they fill out the Texas Medicaid application, send in supporting documents and wait.

It’s not until the Health and Human Services Commission denies the application they discover the difficulty of doing it right. When the case is denied, the benefits lost are substantial. The state has numerous reasons for denial. Any one of them means you lose those benefits forever.

Think about that for minute.

Nursing home costs mushroom quickly

Monthly room and board rates range between $4,500 and $7,000. The pricier dementia-focused facilities can drain $10,000 a month from savings. If your
family member requires a ventilator, the nursing home bill leaps to $16,000. You’re talking serious money!

Federal Medicaid rules require states to process a request for assistance in 45 days. A more likely time table is between 60 and 90 days. Some applications take longer.

Now consider that a patient must be in a “Medicaid certified bed” for 30 days before processing the paperwork. So let’s do the math. To keep it easy to follow, I’ll assume nursing
home costs at $5,000 per month.

Your spouse, parent or grandparent needs nursing home care. You admit him or her to the facility of your choice. You write a check for $5,000 for the nursing home’s first month rent. You expect Medicaid to cover the expense once it approves the application.

A month later you submit the application. You’re now at month #2.

The nursing home demands another $5,000. You nervously pay the fee clinging to the belief Medicaid will cover that cost, too. Let’s assume the caseworker acts quickly and completes her review within 45 days.

You’re now into the third month of the nursing home stay. Half way into month 3 the Medicaid agency determines your loved one doesn’t meet eligibility criteria. The application is not approved. At this point you’ve paid $12,500 out of pocket to the nursing home.

What if the Medicaid agency takes 90 days to come to the denial rather than 45? Your exposure mushrooms to $20,000. You no longer sleep through the night. Now you’re worrying about financial ruin. What impact will that have on you and your family? On the care your family member needs?

How Hard Is The Medicaid Application Process, Really?

In Texas, the application contains 16 pages of questions. As forms go it looks simple. It’s not. How you answer the questions is critical to eligibility. Take income for example. You would think it’s easy to identify how much monthly income the patient receives. Just look at the bank statement and fill in the appropriate field on the form.

The problem is the bank statement doesn’t tell the whole story the way Medicaid needs to see it.The statement shows the amount of money deposited after deductions. Medicaid bases eligibility on the amount before deductions. The mistake is easy to make. And costly.

Recently a family I’ll refer to as the Carson’s contacted me with the same issue. Their dad had only one bank account with a few hundred dollars. Asset eligibility wasn’t an issue. He had far less than the $2,000 allowed.

He had modest income from two sources: social security and a pension. The Social Security deposit was $1,040. The pension deposit amounted to $1,050. The family reported total income of $2,090 to the state. Based on the deposits, they assumed their dad’s income was below the $2,199 limit. They had a nice lady in the business office helping them process the application, too.  They were confident they would soon have Medicaid eligibility.

They made a common but costly mistake.

Both Social Security and the pension had deductions that were not evident on the bank statements. Mr. Carson, Sr. had Medicare Part B insurance. Social Security deducted a premium of $104.90 each month. The gross amount (the amount before the deduction) was $1,144.90. The employer deducted $220 for income taxes and insurance. The pension amount Medicaid considered was $1,270, not $1050.

Rather than being under the limit, the total countable income was $2,414. If income is above the limit of $2,199 – even by a nickel – he can not qualify for benefits. You can apply for Medicaid
benefits, but you cannot become eligible if income is over the limit. Even if you have zero countable assets! In Texas you’ll need a special type of trust called a “Miller Trust.”

Three months passed before Medicaid turned down the application. Responsibility for those 3 months of nursing home fees fell to the family. Since the case was denied, no date of eligibility was established. The agency caseworker didn’t could not by law establish a date of eligibility. Medicaid didn’t contribute a penny toward care.

This family thought they had handled the application correctly. They even had the “help” of the nursing home business manager. When she asked about income, the sons pointed to the income on the bank statement. The only other question asked by the office manager was “Is this all your dad’s income?”

The family assumed she knew what information Medicaid wanted because of her position. They accepted her limited knowledge to indicate the income information was accurate. The business  office manager may have acted in good faith. She may not have known to dig a little deeper. No matter how well intended, when Mr. Carson did not become eligible, the burden of paying the bill fell to the family.

Medicaid Myths and Half-Truths Can Be Costly

One common myth is the amount of assets subject to spend down. Spend down refers to the process of reducing assets to reach asset eligibility limits. You’ll hear over and over again the
patient can keep the home, a car and $2,000.

If the patient is married, the limit is different. You’ll hear the protected amount is 50% of the remaining resources plus the house and car. Nursing homes will also tell you excess assets must be paid towards nursing home care. The true part of that statement is assets may need to be reduced.

What was not said?

That Medicaid laws provide many ways to “spend down” without losing everything. And, no, you are not required to spend the excess only on your nursing home bill. A nursing home resident has an array of other asset protection options.

I had a family come to me after spending $150,000 in private nursing home pay for their mother. The nursing home led them to believe their mom’s assets had to be spent down to $2,000.
Then they could become eligible for Medicaid money.

This family met one of our clients at a church function and shared care giving stories. My client suggested they contact me. Mom still had $100,000 left. I was able to show them strategies to prevent spending a penny more than required. The suggestions protected $52,000 for the family.

In April, a lady came to my office because her husband’s care was harming her health. She had supervised her husband’s needs for 4 years. After 42 years of marriage, she could no longer safely care for him at home. She made the uncomfortable decision to move him to a nursing home. The social worker there said she had too much money. She had to “get rid of” half her assets. Medicaid would not pay her husband’s nursing home cost with the amount of assets they had.

She and her husband had $57,000 in “countable assets,” a home and a car. Since her car was not reliable she decided to spend down half her assets by buying of a new car. She planned to visit the car dealership after meeting with me. She was glad she met with me first.

The social worker was not aware of the importance of timing a spend down.

Medicaid rules provide a way to determine how much a couple can protect. Back in 1989, Medicaid started something called the “snap shot date.” The snap shot date is the first day of the month that the patient begins receiving continuous custodial care. A continuous custodial stay can start in a hospital, rehabilitation hospital or nursing home.

In this situation, she planned to admit her husband to the nursing care from her home. The snap shot date would be set only after he had moved to the nursing facility. Spending down before
admitting her husband would have cost her even more.

Instead I showed her an asset protection plan to keep 100% of the assets. She was able to buy a new vehicle plus have the added comfort of more money in the bank.

5 Reasons Why People Don’t Like To Hire Elder Law Attorneys

When I’m hired to fix a denial I ask families, why they didn’t first come to someone like me to help apply for Medicaid. It boils down to five reasons:

  1. Thinking they have a “simple” case
  2. Having a bad experience with attorneys in the past
  3.  Don’t want to pay legal fees
  4. Pressure from the nursing home to submit the application quickly
  5. Believing nursing home personnel understand Medicaid rules

Let’s take these one at a time.

Is there such a thing as a “simple” Medicaid application?

Here’s my definition: a simple Medicaid planning for an unmarried applicant

  • has income at least $250 below the income limit
  • only one bank account with less than $2,000.
  • no life insurance
  • no funeral arrangements
  • no life insurance
  • no home
  • no assets have been sold or given over the last 5 years
  • no closed banking accounts in the past five years.

For a married applicant the same criteria apply with one exception. Assets must be less than $23,844. If you or your family member’s situation fits these conditions, you have a simple case. Everything else adds complication. Complications increases your potential for denial.

How To Avoid A Bad Experience With an Elder Law Attorney

Like you, when I’ve had a negative experience in life, I go out of my way to avoid recreating it. Hiring an attorney is an important decision. If you weren’t facing a life changing event you wouldn’t be looking for an attorney, right? Because the decision is so important you deserve peace of mind knowing you are in the right hands.

I do my best to offer the type of service I’d want for myself. Not all attorneys think that way, of course. If your situation fails the simplicity test, you’ll benefit having an attorney guide you. These tips will help you find an effective attorney

  1. Look for experience. Medicaid laws are complex. Experience counts. A law firm with lots of experience will better understand the nuances of Medicaid. That understanding usually translates to better results.
  2. Avoid general practitioners. The practice of law, like the practice of medicine, has become specialized. If you needed heart surgery, would you put all your faith in an internist? Getting the best outcome can require an intricate application of the rules. You don’t want to find out too late that the level of knowledge of the attorney you hire to file a Medicaid application is less than you need.
  3. Take advantage of free consultations. Many elder law attorneys provide a free assessment to discuss your needs. Use the opportunity to hear different legal approaches. Use the free assessments to get a sense of the attorney’s style and skill sets. Decide if you feel comfortable with the lawyer’s approach.
  4. Trust your gut. The elder law attorney you choose should put you at ease and instill you with confidence. Are explanations clear? Does he or she treat you with respect and listen carefully? As you’re talking with a potential attorney, pay attention to what you’re feeling. The financial and emotional costs of long term care decisions can be high. Find a lawyer you feel comfortable talking with.
  5. Don’t price shop. The “bargain basement” attorney is not always your best choice. Neither is the most expensive firm. You’re looking for a balance between know how, cost and expected outcome. You are buying advice and wisdom. Superior knowledge and work quality is worth paying for. With that said, get the fee agreement in writing. Be sure it clearly spells out your obligation.

Wanting to Avoid Legal Fees

Nobody likes to pay for something they don’t need. Myself included. Sometimes it’s cheaper to pay a lawyer. Here’s an example that happened recently.

Kerrie Daniels (not her real name)is a retired engineer. She’s smart, analytical, detailed and capable. About a year ago her dad needed nursing home care. Her dad’s income wasn’t enough to
cover the $6,500 cost per month. He was short $3,800 each month.

To get him care, she dug into her retirement funds to make up the difference. No one at the nursing home mentioned Medicaid benefits. Six months later she discovered Medicaid’s nursing
home benefits program. She completed the Medicaid application. The application long with supporting documentation was sent to Texas Health and Human Services
Department.

The application got “lost” in the bureaucracy.

It surfaced 3 months later with a request by the case worker for current bank statements. Kerrie responded quickly to the caseworker’s request. Thirty days later she receives a notice
from Medicaid. It wasn’t good news, either. Her dad’s application had been denied for excess income.

Her dad receives two checks each month: his social security benefit of $1,290 and an “enhanced pension” from the Veteran’s Administration for $1,788. Kerrie had heard that Medicaid ignored “enhanced pension” benefits when checking income eligibility. Thinking an error had been made, she appealed the decision.

The hearing took place 60 days later. The appeals officer informed Kerrie that only part of the Veteran’s benefit is exempt. The balance was countable. The countable amount was high enough to push her dad’s income over the limit. The original decision was affirmed. Her dad was denied.

Keep in mind that she continued to pay the $3,800 shortfall to keep her dad in the nursing home. At this point a year had passed and she had reduced her retirement funds by $45,600 in paying
for her dad. She had submitted multiple Medicaid applications.

Kerrie was worn down and demoralized from the process. She found me with an Internet search, then hired me to create a Miller Trust and submit a new application. I also showed her a special rule that allowed her to keep $8,400 more of her father’s income each year. Plus the application was approved in less than 60 days. She used the extra funds to improve her dad’s quality of life. The total fee? Less than $4,000. Kerrie was not opposed to paying legal fees. Had she known a Texas Medicaid attorney would have been helpful, she would have hired one sooner. If she had, she could have saved $41,000.

How Quickly Should You Submit The Medicaid Application?

It depends. If you know the application will be approved, the sooner the better. The key word is “know.”

An attorney worth his or her salt can tell you quickly if you will qualify without their help. They will be relying on the information you provide so don’t hide any of the facts of your situation. If your circumstances aren’t simple by my definition, get your ducks in a row before you apply for Medicaid benefits. Otherwise you risk a denial and all the costs that pile up as a result.

My maxim is “Never submit until you believe the case will be approved.”

Why Nursing Homes Push To Get Applications Submitted

There are two big reasons:

  1. Pressure from bosses. The business office in a nursing home is responsible for getting paid. They ride herd on their income sources. Nursing homes carry a ton of overhead and operate on narrow profit margins. Owners want to make sure they get paid for providing care. They keep staff focused on bringing in the money they are due. There’s nothing wrong with that. They are in the business to provide service at a profit.
  2. Procrastination. One of the biggest headaches for nursing homes is getting families to submit paperwork. Better than half of the residents have truly simple cases. They don’t need an attorney to ensure approval. They just need to get the application in. Medicaid pays 60% of all long term care expenses in Texas. The program contributes substantial cash flow for facilities. But people being people, they put off filling out the paperwork. The nursing home business office applies pressure to  keep money flowing in.

Medicaid provides a huge portion of the income for most nursing homes. The sooner the app is submitted, the faster the patient gets approved. The faster a person gets approved the faster the nursing home gets paid. For simple cases, a rushed application may not cause any harm. But rushing the application may not be in your best interest if it has complications.

Don’t rely on nursing home personnel for your legal advice

You may be tempted to rely on nursing home personnel to help you. Doing so is dangerous on all kinds of levels. For starters, they don’t study Medicaid rules. It’s not their job. A common belief is nursing home staff know the rules because they deal with Medicaid every day. That’s like saying the billing clerk in your doctor’s  office understands biochemistry. Taking medical advice from a physicians billing clerk puts your health at severe risk. Getting Medicaid advice from anyone in the nursing home threatens your financial health. Medicaid solutions require an understanding of a host of various elements including:

  • Federal Medicaid laws
  • State Medicaid policy
  • Life insurance matters
  • Retirement accounts like IRAs and 401ks
  • Real estate law
  • Laws of inheritance
  • The impact of income taxes
  • Cash flow management

Keep in mind folks there work for the nursing home, not you. It’s not there job to help you save money. There loyalty lies with their employer. No matter how nice they may be, if the advice is wrong, you end up paying for it. I hear sad versions of stories like this one frequently. Don’t be another victim. Don’t put at risk the date you become eligible.

Should YOU hire an attorney to help with a Medicaid application?

Find out in 60 seconds or less. If you answer “yes” to any of the following questions, you owe it to yourself to find an attorney you can trust.

  • Is the patient’s gross monthly income over $2,199? (The amount before any deductions.)
  • Does the patient own a home?
  • Does the home have a mortgage?
  • Is the home rented to a third party?
  • Does the patient (or spouse, if married) own a life insurance policy or annuity?
  • Does the patient (or spouse) own a second home or any other property?
  • Does the patient (or spouse) have IRA, 401k or other type of retirement savings
  • Have funerals been prearranged?
  • Does the patient or spouse have any mineral interests?
  • Is there a Revocable or Irrevocable Living Trust or other trust arrangement in place?
  • If the patient is single, does the value of all assets excluding the personal residence and an automobile exceed $2,000?
  • If married, does the value of all assets excluding the residence and one automobile exceed $23,844?
  • Have assets have been sold or given away in the last 5 years

Each positive answer means and increased the risk to your assets and income. Medicaid benefits could be denied or delayed. Don’t take the chance. Use the information I’ve given you to find an elder law attorney you trust to guide your Medicaid asset protection planning.