Most retired adults in New York qualify for Medicare benefits. People with extensive work histories and those married to professionals can receive Medicare benefits. Those benefits cover basic health care expenses during their golden years.
Not every older adult is eligible for Medicaid benefits. Medicaid can help people pay for long-term care costs that Medicare does not cover. However, Medicaid is a needs-based program. Applicants have to show that their countable assets and income fall below a certain threshold to qualify.
The state doesn’t just look at their current finances but instead at multiple years of financial records. In some cases, applicants face a penalty before they become eligible for Medicaid coverage. People who understand the Medicaid penalty may see the value in planning preemptively in case they need Medicaid benefits later.
The state scrutinizes five years of financial records
People with a few valuable resources might decide to sell them or give them away as their health declines and they require more support. Unfortunately, those actions might limit their eligibility for Medicaid.
When an older adult in need of long-term care applies for Medicaid, the state reviews 60 months or five years of their financial records. Large gifts and transfers made during that time could lead to a penalty. The state adds up all of the questionable transactions and then converts the final figure to a number of months of care. They do that by referencing average care costs across the state.
The applicant then has to pay for their own treatment or nursing home expenses for a certain number of months before Medicaid pays for anything. For those who have already diminished their personal resources, that penalty can leave them in a very difficult position. They don’t have Medicaid benefits or assets but somehow have to pay for their support out of pocket.
How planning helps
Medicaid planning may involve several different strategies. Many people move resources into irrevocable trusts. They can then qualify quickly for Medicaid when the need arises later in life. Others might make gifts or take on co-owners for certain assets.
By diminishing the property owned directly by the potential future Medicaid applicant, Medicaid planning helps increase their chances of getting benefits quickly and may protect them from the stress of the Medicaid penalty. They may also be able to protect their assets from estate recovery efforts that could diminish what their loved ones inherit.
Exploring different Medicaid planning options can be beneficial for people preparing for retirement. The five-year lookback period makes planning as early as possible beneficial for older adults.