Why the Nursing Home Shouldn’t File Your Application (Part 2)

A few weeks ago we were discussing Barry’s problem.  He had spent down Dad’s assets towards his nursing home care and the facility said they would file the Medicaid application.  He gave them the financial records and other documents they requested.  They said they would handle the rest.  So what went wrong and why was the facility demanding payment from him of $20,000 and counting?

 The Medicaid rules are complicated and if you don’t understand them and work with them on a regular basis you can make a mistake that can cost literally tens of thousands of dollars or more.  That’s what happened here.   It’s not clear whether Barry told the facility about the $22,000 or they discovered it when reviewing the financial statements.  It doesn’t really matter.  It’s what they did – or didn’t do – at that point which caused the problem to mushroom.

 Upon discovering the gifts, the nursing home didn’t file the Medicaid application but instead told Barry that there was a 5 month Medicaid penalty.  They were wrong for two reasons.  First of all, the penalty on a gift that size is 3 months, really 3.02 months to be precise.  The second and bigger mistake, however, was not understanding that the penalty hadn’t yet started.

 Under current Medicaid rules the penalty does not start until the applicant has spent down his assets, meets all the other eligibility requirements, needs nursing home level care and files the Medicaid application.  In other words, Barry’s dad needs Medicaid to process his application and determine that, but for the transfer of $22,000 he would be eligible.  Until that happens the penalty doesn’t start.

 By deciding not to file the application, the nursing facility made the problem worse.  If they file the application now, 3 months after they said they would, the State will approve him from that date forward, but for a 3 month penalty.  In other words, Medicaid will kick in after the 3 month penalty period.  But by waiting to file, they lost an additional 3 months for which Medicaid will not cover. 

So who will pay for that?  Good question.  The facility will probably look to Barry but he has an argument that the facility took on the task of filing the Medicaid application and their mistake in not filing in a timely manner is the cause of the additional 3 months for which there is no coverage so they should assume that responsibility.

And what about the original 3 month penalty?  Barry told me he and his brother don’t have the money any longer.  Who knew 4 years ago that the gift was going to be such a problem?  I sympathized with him but told him it’s not the nursing home’s fault either.  If they provided the care to his dad and Medicaid won’t cover the cost because he gifted that money it needs to come back, plain and simple.  Between he and his brother they’ll need to find a way.  That’s the easy part. 

The bigger problem is resolving the issue with the nursing home as to who will pick up the tab for the 3 months that were lost by not filing the Medicaid application.  As I often say, you wouldn’t think of going through an IRS tax audit without being represented by an attorney and/or your accountant.  It’s the same with a Medicaid application.  Having an attorney handle the application will save you and the nursing facility tens of thousands of dollars and a whole lot of aggravation and stress.  In Barry’s dad’s case the cost of that mistake turns out to be $30,000.