Medicaid Introduction: The Asset Test

If you need long-term skilled nursing care and you cannot afford it, Medicaid will pay your nursing home bill. What I find depressing is that a lot of individuals who “can” afford long-term care usually cannot afford to pay for it for longer than a few years because, as we previously stated, the average nursing home bill in Michigan in 2009 is $7,000 a month. Put another way, after paying $7,000 a month until all of their money is spent, individuals are forced to turn to Medicaid. My question is this: Why should you wait for that scenario to take place when you can plan ahead and qualify for Medicaid without being forced to spend your entire life’s savings?

Please allow me to explain. In order to qualify for Medicaid, there are asset tests that require you to be impoverished before Medicaid will kick in. For a single individual, you cannot have more than $2,000 in countable assets and still qualify for Medicaid. Examples of countable assets are IRA’s, stocks, bonds, certain annuities, and accounts. The simplified test of count-ability is determined by the availability of the assets. Ask yourself, “Can I convert this asset into cash and use it?” If the answer is yes, then chances are that it is a countable asset – unless it is an item that has been specifically excluded by your state.

Michigan law provides the following exclusions to the count-ability of an asset: a house (up to $500,000 in value), one car, household goods, funeral/burial arrangements, and other specific assets that are considered not available and therefore non-countable. Let’s use a hypothetical scenario to explain the asset test.

A single man (Mr. Smith), age 69, had a serious stroke and now requires long-term care. He has been moved into a skilled nursing home that is going to cost him $7,000 a month, private pay. He has the following assets:

At first glance you should see that Mr. Smith has $200,000 in countable assets and $160,000 in non-countable assets. In order for Mr. Smith to qualify for Medicaid, without any planning, he would have to spend his countable assets down to $2,000. So how long could Mr. Smith stay at the skilled nursing facility before Medicaid would kick in? $198,000 / 7,000 = 2.4 years.

Now think about this question. What if Mr. Smith got better after two years and was able to move back home? He would only have $28,000 left in countable assets with which to support himself for the rest of his life. I use this hypothetical example to get to my point: There is a way to protect your entire estate from being subject to the “spend down” mentality of Medicaid. Don’t get trapped into losing everything you have because you are unaware of the help that is available.

This introduction is not meant to scare you. It is meant to inform you of events that happen to real people everyday. Some of our clients come into our office needing help after spending hundreds of thousands of dollars. Most of the time we can help preserve what’s left of their estate. But how much more could have been saved had they known what their options were and planned ahead? It is never too early to protect yourself and your family and plan ahead.  Estate Planning is key here.

Michigan Medicaid Attorneys at The Elder Law Firm PC provide assistance in protecting your assets and protecting your family through Medicaid planning.  Located in Grand Rapids, our Michigan Elder Law Attorneys provide services throughout the lower peninsula of Michigan. Contact us by calling 877-960-5233 or filling out our free online Medicaid planning form here.