According to USA Today, about two-thirds of nursing home residents spend down to qualify for Medicaid. Many of them could spend down less, and save more in assets, if they would do just one thing differently.

To understand my point, you need some background.

A nursing home resident in Pennsylvania qualifies for Medicaid after meeting certain requirements, such as citizenship, residency, level of care needed, and (most importantly) financial need.

To meet the financial need requirement, an applicant in Pennsylvania can own certain exempt assets, but can have no more than $8,000 (sometimes as little as $2,400) in non-exempt assets. If the applicant is married, the spouse at home can own much more in non-exempt assets. To understand how, read our post about the community spouse resource allowance.

Because of these rules, many people end up spending down to the point where Medicaid pays for the applicant’s nursing home stay (in return for the applicant’s income, minus certain deductions). But they don’t know how to do that in the most effective way, so they spend down more than they need to.

I’ll make up a simple example. Suppose George and Harriet own a house, car, and $200,000 in checking and savings accounts. George receives nursing care and meets all the Medicaid requirements except for (at the moment) financial need. He receives $2,000 in income each month, but pays $10,000 a month ($329 per day) for nursing care.

Medicaid rules allow Harriet to keep $100,000 and we’ll assume George is allowed to keep $8,000 in non-exempt assets. (To keep the example simple, I won’t go into how I arrived at these calculations, but you can learn more in our blog archives.) Bottom line for now: the couple must spend down $92,000 to qualify for Medicaid.

Let’s also suppose that, unlike many people, they know of some allowable ways to spend down. We’ll say that they plan to spend down their excess $92,000 as follows: $31,000 for irrevocable burial reserves, $18,000 to replace Harriet’s 1992 Chevy, and $43,000 to a special needs trust for the couple’s disabled daughter.

Now I can get to the point of this blog post. George will qualify for benefits, and stop spending $329 a day, once the couple’s bank records show their checking and savings accounts total no more than $108,000.

But here is where they go wrong and lose money. They write checks to pay for the spend-down items (including $18,000 to a used car dealership to buy Harriet a newer model Ford) but it takes 30 days for the last check (to Honest Joe’s Auto Emporium) to get deposited and clear the account.

Once simple change would have saved them $8,000. They should have gone to the bank and asked for three cashier’s checks to pay for the spend-down items. The bank deducts funds for cashier’s checks from a customer’s account immediately. Bank statements would show George and Harriet’s assets at or below $108,000 on the day of the transaction, instead of 30 days later.

As it is, George must pay another $10,000 for 30 more days of care. He saves the $2,000 he would have had to pay if he qualified for Medicaid, but he has still incurred $8,000 in costs ($10,000 for care minus $2,000 of income) unnecessarily that will have to come from the $108,000 George and Harriet were allowed to keep.

This example shows why working with a certified elder law attorney can be so cost-effective. Even one small change can mean thousands in savings.

To learn more, call us at (412) 531-7123 to discuss the details of your situation.


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