The Importance of Medicaid Planning From a Nursing Home’s Perspective

Many people share a common misconception that Medicaid
Planning is not in the best interest of nursing homes. At the same time, many
nursing homes are now recognizing that without proper Medicaid planning, some
residents who have spent down all of their assets are not automatically
qualified for Medicaid…leaving the nursing home with a very large,
uncollectible bill. And, as many of you are aware, non-spouse family members
are not responsible to pay the nursing home bill for their relative. If the
resident is unable to pay and they do not qualify for Medicaid, the nursing
home will have a difficult (if not impossible) task in collecting their
outstanding bill due. Let me give you a couple of examples, where nursing homes
have suffered due to the lack of Medicaid planning:

Scenario one: We received a call from a nursing home regarding one
of their residents who had a bill that was over $27,000 in arrears. We were
told that several months ago, the resident had spent down all of her assets to
less than $2,500 and had applied for Medicaid. However, her application had
just been denied and the resident now had a $27,000 bill and no money to pay
it! The nursing home had just learned that the application was denied because
the resident owned a piece of “worthless land” in another state that she has
been trying to sell for over a year.

Although this resident had been
listing her property for sale for over a year (offering the land at “best
offer”), she had not received any offers. In that sense, the land truly was
worthless. However, as we explained to the nursing home, the property was
appraised at $10,000 and therefore was considered a “countable” asset.

With proper Medicaid planning,
this could have been avoided. The resident would not have applied prior to
disposing of the land and would have qualified upon application …the nursing
home would never have incurred such a large bill.

Scenario two: Our office received a call from a nursing home
resident who had just been denied Medicaid. Her mother also had spent all of
her money and applied for Medicaid. Both the resident and the nursing home
assumed the resident’s application would be approved and the daughter who
called our office was sitting on nursing home bills and medical bills totaling
over $31,000! The problem in this case: although mom had less than $2,500 in
her bank account, she had an insurance policy with a face value of $3,000 and a
cash value of $2,500. Everyone assumed this policy would be exempt. However, if
an individual has life insurance with a face value of more than $1,500, the
cash value of the policy is considered a countable asset. Now,  months after the application was filed, bills
had accrued and the resident needed to spend down the value of her life
insurance before she could qualify.

Again, had the proper Medicaid
planning been done, the life insurance policy would have been cashed out,
assigned to the funeral home or otherwise spent down before the
application for Medicaid was made and the nursing home would not have been stuck
with such a large bill.