The Medicaid Spend Down Scramble – Part 2

The Medicaid Spend Down Scramble – Part 2

In my blog post last week, I wrote about the rushed process of spending down assets to achieve Medicaid eligibility for one spouse without severely impoverishing the other non-Medicaid “community spouse”.  While maximizing what that spouse can keep – what is known as exempt assets” – is one consideration, there is an equally important second consideration – avoiding a Medicaid penalty.

That’s because any Medicaid penalty – determined by calculating transfers for less than fair value during the 5 year look back period leading up to the Medicaid application – is only assessed once the application has been filed and all other Medicaid requirements have been met.  This means that even if we are able to maximize what the community spouse can keep as exempt or non-countable assets, a lengthy penalty will necessitate  using those same funds to cover the cost of care during the time frame of the penalty.   

In the end, it may leave the community spouse with next to nothing should the penalty be of any length and the cost of long term care at the private pay rate – which is much greater than the Medicaid rate – be $15,000 per month or more.

That’s why it is always best to plan ahead because there are many ways to avoid penalties – provided you know about them and have time to correct them.  

I’ll illustrate what I mean next week.