How is a "Gift" Problem Fixed?

This is the Million Dollar question. Once a person has made a gift innocently or not, how is the problem fixed.

First, it is important to understand what the problem is. Medicaid penalties only begin to run when:

1. A person is in a nursing home or at home and applies for Medicaid benefits;
2. If that person is single, generally, his or her assets must below $2,000.00 and if the person is married her or she can have no greater then $2,000.00 and the spouse at home must be below his or her spousal resource limit.

The problem occurs when a person is in a nursing home, has only $2,000.00, and is penalized for Medicaid benefits. For instance: If I give my daughter $10,000.00 thinking its "ok" because my plumber told me so, when I apply for Medicaid, I will be penalized for $10,000/$239.41 or 41 days. I do not have the money to pay a nursing home for 41 days (in New Jersey I could need over $12,000.00 to pay for 41 days.

Where do I get the money?
What will happen if I do not get the money?

Solution 1 - My daughter can give me back all the money. When I write "all", I mean all. If my daughter, in the example above, gives me back $9,999.99 I am still penalized for 41 days. Only if she gives me back all the money will my penalty be erased.

This is fine if my daughter has the money to give me. But what if she does not have the money? What will happen?

Not necessarily in order, the nursing home will sue me and my daughter. They may follow the notice procedure required in the State of New Jersey and seek my discharge. Or the facility will be stuck with me, without payment, for a period of time.

Now in this example, my daughter may have the money to give to me, but what if I made charitable donations, paid caregivers illegally, or commingled my money with my daughter? The outcome is the same - unless every penny "given" away by me is returned to me, I will be penalized by Medicaid.

The next blog entry will address an additional solution.

What is a "Gift?"

Gift Pitfall #1 - Paying for home care "informally."

"Informally" is a nice way of saying, illegally. But in my experience many people pay for their home care, in cash, to a person who is not trained. Many informal caregivers live in the house and receive room and board in addition to a weekly payment.

From a financial standpoint, if a person who needs round the clock care wants to stay in their home, "informal care" is potentially the most cost effect method of paying for the care.

An "informal" caregiver could be paid $700.00 a week. That same week, from a home health aid agency could cost $1,500.00 or more for the week and a nursing facility, in New Jersey, is over $2,500.00 a week.

I wrote earlier that "informal care" could be the most cost effective method of providing care, but there are some compelling reasons to avoid "informal care."

The most compelling reason to avoid "informal care" is because the payments are considered gifts for Medicaid purposes.

For Example: Mr. Green pays $700.00 a week for "informal home care" for the five years before entering a nursing home. He spent $182,000.00 for care over the 5 years. When Mr. Green applied for Medicaid, the County workers asked him for proof of how he spent the $182,000. He has no proof, because he paid cash. If Mr. Green can provide the County with a signed statement from the caregivers attesting to the payments they received, then he will not be penalized. The problem is that most people who get paid illegally do not want to admit it to a government entity.

So, in the end, Mr. Green will be penalized for $182,000/$239.41 or 760 days. He will not be penalized until his assets fall below $2,000.00 so he has no idea how he will pay the nursing home.