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The Medicaid Spend Down Scramble – Part 3

The Medicaid Spend Down Scramble – Part 3

In my blog post for this week, I finish the topic of the spend down process before Medicaid and why it is so important to the financial well being of the healthy non-Medicaid spouse.   As I explained last week, maximizing what that spouse, known as the Community Spouse, can keep is really half of the equation.  Avoiding penalties, however, is the other half.

That’s because a penalty means an additional period of time the Communtiy Spouse must pay for the ill spouse’s care.  That time period begins only after the Medicaid application is filed, all documentation has been provided in the course of the application process and the application has been approved with the penalty as determined by Medicaid.  Of course, that means the Community Spouse must pay for the care out of the assets he or she keeps as part of the Community Spouse Resource Allowance (CSRA).

So, if the health spouse keeps 1/2 of the assets but only up to a maximum of $154,140 but then has to pay for care for another 2 or 6 or 12 months or longer – the exact time frame being dependent on the length of the penalty period – that can eat up much of what the Community Spouse has.  Utilizing a Medicaid compliant annuity or other strategy to maximize the CSRA is critical to avoid impoverishing the   Community Spouse.  If the cost of care is $15,000 per month, even a 4 month penalty can almost cut the CSRA in half.  When we have had instances of clients being on a ventilator, the private pay cost is $30,000 to $40,000 per month.

As one can see, at that rate the Community Spouse could be required to use all of his or her CSRA to cover a penalty period.  Avoiding or at least minimizing the penalty becomes absolutely critical but takes time.  We must first identify the penalty by undergoing a thorough review of 5 years of records before we can then determine what we can do to avoid penalties where possible.  

This also must be done before the date we want Medicaid to begin – what is referred to as our Medicaid pick up date.  That’s because we must prove eligibility as of that date, which means that ideally you shouldn’t wait until a month or two before you are going to need Medicaid.   Contact an elder law attorney with knowledge of Medicaid regulations and law preferably a few years before that application date and for best results 5 years before any anticipated Medicaid application.