Receiving proper medical care in the United States can be a challenge sometimes, in no small part due to the many legal complications surrounding it. In particular, navigating the various requirements surrounding Medicaid can feel like putting together a 1000-piece jigsaw puzzle while blindfolded. Some of this comes down to people waiting far too long to learn about the process: Medicaid is for the elderly and those who need institutionalized care, so many choose to cross that bridge when they reach it.
However, the smarter option is to prepare for these types of issues ahead of time, ensuring that you won’t be caught flatfooted when you need to understand the process. Medicaid planning is an essential step in life, irrespective of your current age or need. It is simply a matter of taking the time and effort.
What Is Medicaid?
Medicaid is a federal assistance program that is administered at the state level and is designed to help those who are financially eligible pay for the cost of long-term care and allows access to other medical and healthcare benefits.1 It was first established under Title XIX of the Social Security Act of 1965, with federal statute and regulations governing the Medicaid program found at 42 U.S.C. Code 1396a (1988 & Supp. V. 1993) and 42 C.F.R Code 430-36, 440-42, 447, 455-56 (1994).2 Intended to serve the needs of the poor and medically needy, Medicaid has strict financial requirements for eligibility.
Medicaid encompasses a wide variety of services, which in turn are provided by an equally wide variety of professionals and volunteers. That said, it has its limits. For one, it only covers nursing home care, along with some in-home care under special waiver programs. Meanwhile, Independent living facilities and assisted living facilities are not covered.3 The care provided is also usually limited: while it provides coverage for those in need of skilled nursing care, such as physical therapy, it does not cover most basic needs like a private room, telephone, personal clothing, or entertainment costs.4 It also doesn’t cover many important medical needs like dentistry and eyecare, so it is important to have a plan in place.5
The Challenges of Medicaid
Perhaps the biggest issue with Medicaid is the simple fact that demand is far greater than the supply. At least 70% of Americans who turn 65 in any given year will need long-term care services and support at some point in time.6 Extended lifespans and surging drug prices have made elder care increasingly expensive, which in turn has led to a great deal of “fiscal tug-of-war” between government officials and medical professionals.
While the state might be required to cover patients that cannot pay for medical care, there are several limits to their service, whether it be through more documentation, increased taxes, or offering a limited number of visits.7
What Is Medicaid Planning?
Simply put, Medicaid Planners help clients structure their financial resources and prepare documentation to ensure the best possibility of being accepted into the Medicaid program. This includes creating trusts, managing asset transfers, and converting countable assets into exempt assets.8 They can also manage finances to ensure that a healthy spouse of an applicant has adequate income and resources to live comfortably and independently during and after the time when their partner is receiving care assistance. Ultimately, the goal is to manage one’s assets in a way that one can qualify for Medicaid’s long-term care benefits while simultaneously preserving the value of these assets.
The benefits of Medicaid Planning are obvious: the application process is complex and long-term care is extremely expensive. As such, whether you just want to improve your own chances of being accepted or you want to guarantee your loved ones have access to the care they need, it pays to take steps that better ensure the possibility of acceptance into the Medicaid program.9 Also, while not everyone is in the age bracket where Medicaid is a top concern, advance preparation is key for security long term. If you don’t stay ahead of the curb, a sudden illness or accident can leave you paying out-of-pocket for nursing or other long-term care costs.10
Medicaid has more than 60 distinct eligibility categories, some mandatory and others optional.11 This can be complicated, and time-consuming, and even the simplest of errors can result in the denial of benefits.12 Need for Medicaid is determined on a case-by-case basis, using criteria that initially divide recipients into three categories:13 14
- Mandatory Categorically Needy: Federal law requires that states cover all persons in this category. Includes recipients of Aid to Families with Dependent Children (AFDC) and most aged, blind, and disabled persons receiving assistance through the Supplemental Security Income (SSI) program.
- Optional Categorically Needy: States are permitted to extend Medicaid coverage to needy individuals from a number of other specific groups. If done so, it must provide the same level of benefit as the “Mandatory Categorically Needy.”
- Medically Needy: Individuals whose income, while too high to qualify them as categorically needy, is reduced by large medical expenses that their available income effectively equals the income of categorically needy individuals.
Beyond this, eligibility for Medicaid nursing-home benefits requires that the applicant demonstrates categorical eligibility by showing that he or she is:15
- Aged 65 or older.
- A U.S. citizen, a lawfully admitted “alien”, or an “alien” permanently residing in the U.S. under color of law.
- A resident of the state where the Medicaid application is filed.
- Confined continuously to a medical institution for 30 days prior to attaining Medicaid eligibility.
- Financially eligible (Generally: The applicant’s income cannot exceed 300% of the current SSI benefit amount).
Along with more general requirements, every state has its own unique eligibility rules. For instance, Indiana has four major categories that qualify for Medicaid pregnant women, children, adults, and aged/blind/disabled. The first two typically fall under the Hoosier Healthwise program, while non-disabled adults are usually served through the Healthy Indiana Plan. Meanwhile, the aged and disabled are served through either traditional Medicaid or Hoosier Care Connect.16 All of these group members’ eligibility is impacted by factors such as age, income, family size, and existing coverage. This differs from Illinois and Michigan, which have their own eligibility requirements and assistance programs, so always look into what is available in your state.
Coming In Prepared
It is highly recommended that if Medicaid is on your mind, you should seek out legal assistance. While self-planning is possible, having a Medicaid Planning professional at your side will ensure efficiency, speed, and accuracy during the entire process, helping you meet the many factors that go into that process. Finally, rest assured that once you have a secure plan in place, the application process will go by smoothly and effectively.
The Legality of Medicaid Planning
First and foremost, it is important to stress that Medicaid planning is 100% legal. While there are laws in certain states that limit who provides legal advice on Medicaid planning, there are no states with laws that would prohibit a family from helping a loved one qualify for their state’s Medicaid program. Though some question the practice (as we’ll discuss later), there are no legal issues on the matter and the clearest boundaries are set on planners and legal counsel, not the loved ones of a potential Medicaid applicant. As such, if you are interested in Medicaid planning and are simply concerned about the legality of the matter, you have nothing to worry about.
The Ethics of Medicaid Planning
Educators, scholars, lawyers, and politicians have expressed mixed opinions on the subject of ethics and Medicaid planning. To some, Medicaid planning is no different ethically from income tax planning or traditional estate planning: they all involve taking maximum advantage of the existing law (within legal, and therefore ethical, bounds). In this regard, planning ahead and accelerating qualification for Medicaid is no different than planning to maximize your income tax deductions to receive the largest income tax refund allowable, taking advantage of tax-free municipal bonds, or planning your estate to avoid paying estate taxes.
On top of this, some scholars have argued that Medicaid planning is a necessity for overcoming a discriminatory health insurance system. There is consistent evidence that the U.S. health insurance system discriminates against people dealing with certain types of chronic illnesses, particularly those that tend to require long-term care, such as Alzheimer’s disease, Parkinson’s disease, Huntington’s disease, Amyotrophic Lateral Sclerosis (ALS), and other degenerative conditions. When no one has a right to basic health care or long-term care, it is reasonable for people to take the necessary steps to ensure their needs are taken care of.
Still, for various reasons, there are critics of Medicaid planning. Some argue that Medicaid is strictly for “the poor” and that the people who rely on Medicaid planning aren’t part of the intended demographic. They tend to criticize Medicaid planning as people “voluntarily impoverishing” themselves to qualify for benefits, insisting that Medicaid’s strict eligibility criteria were put into place to ensure that only the truly needy could obtain benefits. They also tend to say that people should buy long-term care insurance, as it would lead to many of the same benefits without putting unnecessary financial pressure on taxpayers.
Additionally, some claim that children who engage in Medicaid planning for their parents are depriving them of good care, with certain critics even calling it a form of elder abuse. They claim that many elders in nursing homes lack the mental capacity to do Medicaid planning, leaving their children to make choices that favor saving money over guaranteeing good long-term care. Instead, they would use the system to acquire their parent’s assets while the elder winds up with substandard long-term care.
Medicaid Planning: The Right Choice For You?
Whether you’re an older person looking to secure your own long-term care or the child of an elder working to help them qualify for Medicaid, there are plenty of reasons to look into Medicaid planning. However, as we’ve covered, there are a number of ethical considerations to work out ahead of time. If approached in earnest and with good intentions, Medicaid planning is a valid strategy for navigating a dense network of regulations and stipulations. Of course, Medicaid planning can also be misused by the ill-informed or the ill-intentioned. This is why we always suggest that Medicaid planning be handled alongside a respectable legal professional: so long as they follow the Model Rules of Professional Conduct, you can be certain that they will guide clients towards their goals without falling into unethical behavior.
1. Alperin, S. (n.d.). 11 Frequently Asked Questions For Medicaid Planning Attorneys. Alperin Law. Retrieved October 8, 2021, from https://www.alperinlaw.com/blog/11-frequently-asked-questions-for-medicaid-planning-attorneys.cfm.
2. Regan, S. P. (1995). Medicaid Estate Planning: Congress’ Ersatz Solution for Long-Term Health Care. Catholic University Law Review, 44, 1217–1267. https://scholarship.law.edu/cgi/viewcontent.cgi?article=1612&context=lawreview
3. Alperin, S.
4. Hale Ball. (2021, March 6). Medicaid planning attorneys: Northern Virginia. Hale Ball. Retrieved October 8, 2021, from https://haleball.com/practice-area/elder-law/medicaid-planning/.
5. Alperin, S.
6. Hale Ball.
7. Takacs, T., & McGuffey, D. L. (2002) Medicaid Planning: Can It Be Justified? Legal and Ethical Implications of Medicaid Planning. William Mitchell Law Review, 29(1). https://open.mitchellhamline.edu/cgi/viewcontent.cgi?article=1598&context=wmlr
8. PayingforSeniorCare.com. (2020, October 14). Medicaid Planning: Pros & Cons, Costs and Strategies. Paying for Senior Care. https://www.payingforseniorcare.com/find_medicaid_planning_help.
9. American Council on Aging. (2021, February 12). Medicaid Planning: Definition, Costs & Types of Planners. Medicaid Planning Assistance. https://www.medicaidplanningassistance.org/medicaid-planning/.
10. American Council on Aging.
11. Commonwealth Fund. (2018, June 12). Medicaid and the Role of the Courts. Commonwealth Fund. https://www.commonwealthfund.org/publications/fund-reports/2018/jun/medicaid-and-role-courts.
12. American Council on Aging
13. Takacs, T., & McGuffey, D. L. (2002) Medicaid Planning: Can It Be Justified? Legal and Ethical Implications of Medicaid Planning. William Mitchell Law Review, 29(1). https://open.mitchellhamline.edu/cgi/viewcontent.cgi?article=1598&context=wmlr
14. Regan, S.P. (1995). Medicaid Estate Planning: Congress’ Ersatz Solution for Long-Term Health Care. Catholic University Law Review, 44(4). https://scholarship.law.edu/cgi/viewcontent.cgi?article=1612&context=lawreview
15. Takacs, T., & McGuffey, D. L.
16. Indiana Government. (n.d.). Eligibility Guide. Indiana Medicaid. https://www.in.gov/medicaid/members/apply-for-medicaid/eligibility-guide/.
17. American Council on Aging. (n.d.). Medicaid planning: Definition, costs & types of planners. Medicaid Planning Assistance. https://www.medicaidplanningassistance.org/medicaid-planning/.
18. American Council on Aging.
19. American Council on Aging.