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A Muddy Medicaid Paper Trail Leads to Potential Financial Ruin ( Part 1)

Medicaid applications are getting tougher to get approved these days. Gail called us when Mom had just entered the nursing home after having lived with her for several years.  Mom had 2 months of funds remaining.  Gail called us to handle the Medicaid application.  I told her we had to work quickly.

For starters, we had to review what was in the 5 years of financial records that we would need to produce for Medicaid under its 5 year look back period.  As I have explained in previous posts, you don’t want to wait till the State asks for the documentation because they typically will give you 10 days to produce it under the threat of a denial for lack of documentation. Now you might think, “what’s the big deal?  We’ll just refile.”  However, if Medicaid denies our application 5 months after we file it, for example, we can only refile and ask for 3 months of retroactive benefits, losing out on 2 months.

So, we got right to work.  And we found a “muddy” paper trail.  Gail told us that Mom’s dementia had caused her to be destructive.   Mom had destroyed furniture, carpet, walls and appliances in Gail’s home, all which Gail, over the past several years, had replaced.  Except that she didn’t keep good records of how she paid for the items she purchased and she did much of it from her account, not Mom’s.

Gail told me that Mom had $50,000 of stock which she cashed in over a 2 year period.  Gail deposited it into her own account and then paid for expenses from there.  I told her that was going to be a problem.  Unless we could establish by a clear paper trail that the money was spent for Mom, Medicaid would likely assess a penalty – a period of ineligibility.

In fact, that’s exactly what happened.  Gail struggled to find receipts showing the repairs and purchases she made.  Some of the contractors she hired and paid cash.  Work that was done wasn’t documented clearly.  In some cases, additional work was done that was not related to the damage caused by Mom.

Gail also had a tough time producing documentation to show where the cash from the stock sale went.  That account had been retitled in Mom’s name jointly with Gail’s son, Bob, some 20 years ago.  But, I told Gail that we would have to prove that.  If Bob’s name was only added within the last 5 years then we were dealing with a Medicaid penalty.

After months of back and forth communication with Medicaid, they reached a decision.  We received approval with a 6 month penalty, meaning Gail would need to cover another 6 months of Mom’s nursing home care at the nursing home’s private pay rate.  “It’s so unfair,” she told me.  “I have spent much more than $50,000 on Mom’s care and repairing the damage caused to my home as a result of her dementia.  Now I have to pay even more?“

Unfortunately, she couldn’t get me the documentation fast enough before time ran out on our application.  So was that it?  Was Gail out of options?  Not quite.  Next week I’ll tell you what we did to fix Gail’s problem.