As an elder law attorney who focuses on Medicaid qualification, I frequently encounter people who have only been told what they cannot do when qualifying for Medicaid. This incomplete information leads to many misconceptions about what can be done when an older person needs to move to a nursing home and obtain Medicaid. People also come to me knowing some of the rules about Medicaid, such as the 5-year look back period and the $2,000 rule. When meeting with a prospective client, often I need to clear up the misconceptions caused by incomplete information and knowledge of only some of the rules. One common misconception is that a single person has to “spend down” to $2,000 before he or she will qualify for nursing home benefits. While it is true that a single person will not qualify for Medicaid until they have $2,000 or less in countable assets, there actually is no rule requiring a spend down in the Medicaid law. The belief that one must spend down to $2,000 often comes from people relying on the Department of Human Services of nursing home for their Medicaid information. In reality, the law provides many different protections that may apply in certain situations. By way of illustration, consider the hypothetical case of an older person whom we will call Margaret.
Margaret and her late husband, Sam, had always taken care of their daughter, Elizabeth. Elizabeth is 45, has never worked, and has never left home. She is “developmentally disabled” and receives SSI (Supplemental Security Income). They had always worried about who would take care of her after they die. A few years ago, Margaret was diagnosed with dementia. Her health has deteriorated to the point that she can no longer live at home. Now she is living in a nursing home and is paying $6,000.00 per month out of savings. Margaret's other daughter, Jane, is helping out with her sister Elizabeth. Jane is worried that there will not be any money left for the care of Elizabeth.
Jane is satisfied with the nursing home Margaret is in. The facility has a Medicaid bed available that Margaret could have if she were eligible. Medicaid would pay her bill. However, according to the information she got from the social worker, Margaret is $48,000.00 away from Medicaid eligibility. Jane wished there was a way to save the $48,000.00 for Elizabeth. There is. Jane can consult an Elder Law attorney to set up a “special needs trust” with the $48,000.00 to provide for Elizabeth. As soon as she does, Margaret will be eligible for Medicaid because the use of such a trust is not a divestment. Elizabeth won’t lose her benefits, and her security is assured. Margaret was able to obtain Medicaid without spending down to $2,000.
Of course, all trusts must be reviewed for compliance with Medicaid rules. If the trust is drafted in compliance with Michigan’s Medicaid regulations and a complete Medicaid application is submitted, the trust and application will be approved.