What Are the Differences Between Medicare and Medicaid?

MEDICAID PLANNING IN OKLAHOMA

WHAT IS THE MEDICAID LOOK BACK?

By Larry Parman OKLAHOMA ESTATE PLANNING ATTORNEY

Because of Medicaid Look Back, You Must Employ a Relatively Long-Term Medicaid Planning Strategy

If You Want to Become Eligible at the Right Time

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Before we look at the Medicaid look back in detail, we should explain why

Medicaid is relevant to so many senior citizens.

LONG-TERM CARE COSTS

Medicaid is a jointly administered federal/state government health insurance

program. It is a program that is available to those with significant financial need.

People of all ages can potentially qualify for Medicaid.

Medicare is also a government run

health insurance program.

Medicare is not based on financial

need; you earn Medicare eligibility

by earning retirement credits while

you are working and paying taxes.

The work requirements for

Medicare eligibility are quite

modest when you analyze them objectively. You can gain as many as four

retirement credits per year. Once you have 40 credits, you will qualify for

Medicare when you reach the age of 65.

In 2014, you gain one credit for every $1200 that you earn. If you earn at least

$4,800, you accrue the maximum four credits for the year. Do this for 10 years,

and you will qualify for Medicare.

Medicare is of great assistance to seniors who are enrolled in the program.

However, it does not pay for everything in its entirety. There are out of pocket

costs that you should be aware of, and there is one very big gap.

Most seniors will need help with their activities of daily living eventually.

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Medicare will not pay for long-term care, because it is considered to be custodial

care. Medicare will pay for up to 100 days of convalescent care, but it won't pay

for in-home custodial care, and it won't pay for full-time residence in an assisted

living facility.

Medicaid will pay for long-term care. This is why it is relevant to many senior

citizens. In fact, the majority of senior citizens who are in nursing homes are

receiving Medicaid assistance.

MEDICAID PLANNING

As we stated previously, Medicaid is a need-based program. If you have financial

resources to speak of, you cannot qualify for Medicaid.

People who retired with some resources ultimately become eligible for Medicaid

by spending down. This expression is more or less self-explanatory: you spend

down your assets until you have

very little left. You can then

qualify for Medicaid if you need

long-term care.

This is a logical course of action.

You could essentially give

inheritances to your children

while you are still alive in an effort

to spend down your resources with Medicaid eligibility in mind.

MEDICAID LOOK BACK

The Medicaid program has a five year look back period. If you give away assets

within five years of applying for Medicaid, your application will not be approved.

Medicaid Planning in Oklahoma: What Is the Medicaid Look Back? www.ParmanLaw.com 4

Your eligibility will be delayed for a period of time that is determined based on a

particular formula.

Medicaid evaluators will determine the amount of the divestitures that have

taken place within this look back period. This amount will be compared to the

average cost of long-term care in the state of your residence. Your period of

ineligibility will be based on this equation.

To clarify by example, if long-term care cost $70,000 a year on average in the

state of Oklahoma, and you gave away $140,000 during the look back, your

eligibility would be delayed by two years.

CONCLUSION

A significant percentage of seniors ultimately rely on Medicaid to pay for long-

term care, because Medicare will not pay for living assistance.

Medicaid is a need-based program. You cannot qualify if you have significant

financial assets still in your name. For this reason, people often spend down

their assets in an effort to fall within the eligibility parameters.

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You cannot give away assets today and qualify for Medicaid tomorrow because

there is a five-year look back. If you give away assets within five years of

applying, a penalty is imposed, and your eligibility will be denied for a particular

period of time.

Because of the look back, you must employ a relatively long-term Medicaid

planning strategy if you want to become eligible at the right time. It may be

possible to reduce your countable assets over time in an intelligent and

measured fashion.

When you think about divestitures you may immediately think of direct gifts to

your loved ones. This is one possibility, but it is also possible to convey assets

into an income-only irrevocable trust. You could potentially remove these assets

from your portfolio for Medicaid planning purposes as you continue to derive

income from the earnings.

Medicaid planning can be complex, but the results will typically be well worth

the effort. To learn about Medicaid planning in-depth, arrange for a consultation

with a licensed Oklahoma elder law attorney.

Your lawyer will answer all of your questions, apprise you of your options, and

make personalized recommendations based on your unique situation.

REFERENCES

U.S Department of Health and Human Services http://longtermcare.gov/the-basics/what-is-long-term-care/ Medicaid http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Long-Term-Services-and-Support/Long-Term-Services-and-Support.html

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About the Author Larry Parman

After helping his own family deal with a lengthy probate and a battle with the IRS following his father’s death in a farm accident, Larry made a decision to help families create effective estate plans designed to reduce taxes, and minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors. Following a dozen years in the investment banking and financial services business, in the mid-1980s Mr. Parman formed a law firm that gives families the peace of mind that comes from having created a premier estate and financial plan. After forming his law firm in 1984, he offered a series of public and private seminars to inform the public about using a Living Trust as the foundation

of a family’s estate plan. Today, Parman & Easterday is one of the leading business and estate planning law firms in the Midwest. The firm’s primary focus is on business and estate planning, elder law, asset protection, and providing effective estate planning solutions for clients. Today, the firm’s premier estate plan design is referred to as a Legacy Wealth Plan. Mr. Parman is a frequent guest on the radio and can be seen on television talk shows explaining the importance of proper estate planning. Prosperity Productions selected Mr. Parman as a featured speaker in a nationally-recognized educational video on Living Trusts. He is the author of numerous published articles on financial and estate planning matters and the co-author of two books, Estate Planning Basics: A Crash Course in Safeguarding Your Legacy and Guiding Those Left Behind in Oklahoma: Settling the Affairs of Your Loved Ones. Mr. Parman is a member and Fellow of the American Academy of Estate Planning Attorneys. He is also a member of the Oklahoma and Missouri Bar Associations, the American Bar Association, and the Oklahoma City Estate Planning Council.

www.ParmanLaw.com

OVERLAND PARK, KS 10740 Nall Avenue, Suite 160 Overland Park, KS 66211 Phone: (913) 385-9400 Fax: (913) 385-9422

OKLAHOMA CITY, OK 13913-B Quail Pointe Drive Oklahoma City, OK 73134 Phone: (405) 843-6100 Fax: (405) 917-7018