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Medicaid Redeterminations – Part 3

In this third post on Medicaid redeterminations, I explain changes that occur after Medicaid is approved that cause problems when it comes time for a Medicaid redetermination.

One change is an expected or unexpected sum of money received by the Medicaid recipient.  This could be because of an inheritance, personal injury settlement or the sale of a home that, while it was owned by the applicant during the application process  did not prevent a Medicaid approval, but once the cash proceeds are received becomes a countable asset.

If the Medicaid recipient is under age 65 then a 1st party special needs trust can be created and funds transferred there to preserve Medicaid.  Alternatively, if the recipient has a child deemed disabled by Social Security or the State of New Jersey, funds can be transferred to that child or to a trust for the sole benefit of the disabled child.  Again, Medicaid can be preserved.

When neither of those options is available, then if the amount of money involved is small, it may just be easier to give the funds to the State and remain on Medicaid rather than terminate Medicaid, spend down the funds and reapply.   After death, the State’s estate recovery process would require the payment to the State anyway.

If the amount is large enough, however, giving the money to the State is not appealing, especially if any Medicaid estate recovery lien after death is likely to be much smaller than the sum in question.  The State will not refund the excess funds after death.  

In that case, terminating Medicaid and then using a Medicaid annuity strategy to protect a portion of the funds may be desirable.  A transfer of approximately 50% of the funds out of the Medicaid applicant’s name (the exact percentage in each case is dependent on a number of variables) and purchasing a Medicaid annuity with the rest will allow us to immediately reapply for Medicaid.  That allows the Medicaid recipient to, in essence, “keep” the transferred funds.

Next week I’ll discuss what happens when the community spouse dies and how that can affect a Medicaid redetermination.