What Happens If Mom Runs Out of Money, But Needs Care?

Worried Mom Will Run Out of Money? Who isn’t—given the costs of assisted living, memory care and skilled nursing? And what happens if she does?

“I probably reviewed over 500 Medicaid applications during my years there,” Wallace said, “and that certainly helps me help my clients qualify.”

Special assistance is a Medicaid program that pays for Assisted Living care. To qualify, the individual must have less than $2,000 in assets and a monthly income that is not one penny more than $1,247. That is the hard cut-off for 2018. For a special care unit, for example memory care, the gross monthly income limit is $1,580.

“If you are one dollar over those amounts, there is no assistance,” Wallace emphasized.

To protect assets, parents might gift their children their savings account or house before they realize that there is a three-year “look back” period. In other words, if Mom applies for Special Assistance the year after she gave her assets to her daughter, her application will be declined. The “look back” period for a skilled nursing facility is five years.

A very common worry among spouses is how to pay for care if one spouse falls ill and the other one is well and wants to stay at home. “Do we have to sell the house?” many ask Wallace.

“The simple answer is no,” she said. “Medicaid only looks at the assets of the person applying for special assistance. The ill spouse can transfer her or his assets to the well spouse without any penalty or look back period.”

“The best time to plan is when someone begins to slow down, first gets diagnosed with Alzheimers or has a health incident, such as a stroke or cardiac arrest,” Wallace said. “In these kinds of cases, you can surmise that the loved one will likely need a facility at some point in the future.”

If the person needs skilled nursing care, the Medicaid rules are very different. The asset limit is still $2,000 for that. However, the person’s monthly income limit can be up to the Medicaid reimbursement rate for the facility where they are. For most facilities in this area, that amounts to $4000 to $5000/month. Because the reimbursement rate can vary between facilities, there is no set amount. The person will receive Medicaid at the facility as long as the person’s income is less than the Medicaid reimbursement rate for that facility.

For Medicaid in a skilled nursing facility there is protection for assets for a spouse still living at home. “But there are some limits, “Wallace added, “All you have to do is shift everything into the name of the spouse at home, which is easy, though there are limits. The spouse at home can keep a minimum of approximately $24,720 up to a maximum of half of the couples’ assets, totaling no more than $123,600.”

In other words, if the couple has $500,000, the spouse at home can only keep $123,600. If they have $80,000, the spouse at home can only keep $40,000. It’s one-half.

There are vehicles for the spouse at home to convert some of those countable assets to non-countable assets under the Medicaid rules, but this is best handled by an elder law attorney.

As everyone knows, there is a wide range of Assisted Living, Memory and Skilled Care options, with some that have a mix of special assistance and private-pay clients, and then some that are for private-pay residents only.

One might think that care at places which serve a mix of Medicaid and private pay residents is abysmal. That’s not necessarily true. However, if Mom or dad are able to privately pay for a portion of their stay (the average is 24 months), they will have more options to choose from. It’s important to know upfront whether the place they have selected has Medicaid beds. Many don’t and will evict Mom when she runs out of money.

An additional consideration is that if Mom’s Special Assistance application is accepted, not only does Medicaid help pay for the cost of care, it also provides Mom a Medicaid card, which means that she doesn't necessarily have to keep a Medicare supplement plan in place anymore.

What is the Special Assistance application like?

“When I help a family, I don’t only identify ways to protect assets, I often have to educate the caseworker on the law. There’s a lot of gray areas. It’s complicated,” said Wallace. “The manual, when it was in print, was like 3 inches thick.”

“The processing timeframe is 45 days on average. I have had cases linger for 60-70 days. It is a really overwhelming process to lay people. When I do an application for a family, I charge a flat fee. I incorporate all of the planning steps in that flat fee. The amount that I and other practitioners charge is usually around the cost of one month’s stay at a private pay nursing home… so if they are there for another year or two, the savings can really add up.”