If you worked hard for decades, making all requisite payments to government entitlement programs through payroll withholding taxes, you’re dutifully entitled to receive benefits under the Medicaid program in the event you need long-term care, right?
Let’s take a quick time out on that assumption to clear up what much empirical and anecdotal evidence indicates is a base misunderstanding that legions of Americans have when the word Medicaid pops up.
In a nutshell, they confuse it with Medicare, which is an altogether different thing. As a recent Forbes article addressing Medicaid and its so-called “look-back” period notes, many people “refer to the two programs interchangeably.”
In fact, it is Medicare that you fund through your withholding at work, with that program indeed being an entitlement that is available when needed.
Medicare is flatly different from Medicaid, though, which is, as Forbes states, “a form of social welfare designed to help people in need.” Think principally long-term care in a nursing facility.
What’s key about Medicaid is that it is administered by state authorities (Medicaid is commonly termed Medi-Cal in California), who care quite a bit about its funding and the parties declared eligible to benefit from the program.
That is, regulators will demand in every instance close access to the financial records of an applicant, wanting to know with certainty that an individual is truly in need of help and has not squirreled away substantial assets that, if discovered, would otherwise serve as program disqualifiers.
What they will specifically do is engage in a look-back period of five years, being guided by this assumption: Expenditures — e.g, gifting and asset transfers — that occurred prior to such period were legitimate and beyond regulatory purview, but spending within that period might reasonably have been motivated by a desire to skirt upcoming Medicaid obligations.
The bottom line: Asset transfers within the look-back period are subject to penalties.
That certainly makes this self-imposed question for many individuals and families a relevant query: How much can I keep (legally protect) and qualify for Medicaid?
That is something that an experienced estate planning attorney who routinely counsels clients on Medicaid-related matters (spending down, look-back windows, gifting and so forth) can closely visit, educating a client and his or her family on steps that can be timely taken to legally protect some portion of wealth and still ensure program eligibility for Medicaid.