Medicaid Nursing Home use-Down Program: 5-Year Look Back
Seventy seven million (77,000,000) middle class aging baby boomers are going to rely on Medicare as their default long-term health care policy. The Cato Institute estimates that $60 trillions of Medicare is an unfunded, unaccounted for obligation.*
The Medicare / Medicaid programs are dual eligibilities government programs for the aged, the blind, and disabled, and heavy long term care users for the poor of the poorest. Medicaid is the largest liability in state budgets having topped elementary and secondary education. For 2003, total Medicaid expenditures in most states were $267 billion. Of this, Medicaid financed nursing home care accounted for approximately $51 billion and home care $9.9billion.*
The new Tax Reduction Act of 2005 mandated that seniors use-down all of their combined assets before the sick spouse can qualify into a nursing home. The act requires a 5-year look back for any transfers by seniors designed to deprive the state of those obtainable resources to pay for the nursing home.
WHAT IS THE NURSING HOME use-DOWN?
The use-down provision is that you must self pay for your nursing home care with the sale of all your personal and real assets to the point of financial devastation of your lifes savings driving you into financial destitution. Nursing home eligibility will be determined by your without of any obtainable resources designed specifically to punish/impoverish your healthy spouse.
WHY IS MEDICAID ESTATE PLANNING IMPORTANT?
The problem with the 5-year look back provision is that the new Medicare regulations do not consider the healthy spouse. Its a social punishment of the marriage certificate. Its a new social discrimination based on health. ultimately seniors will be forced to choose divorce for the sake of retaining their financial dignity.
WHATS HAPPENING WITH THE MEDICAID HEALTH CARE SYSTEM?
The gross mismanagement of the social security system is going to force baby boomers into giving serious thought about their long-term health care. There wont be any money by the time baby boomers reach retirement age. Health care has been escalating at an upsetting speed. Government planners have figured out that they can save $10 billion over the next 5 years by increasing the look back provision from 3 years to 5 years.
WHATS THE 5-YEAR LOOK BACK FOR THE NURSING HOME PROGRAM?
Before you qualify for the government nursing home assistance program, there is a 60 month look back to see if and when you transferred your assets for less than fair cash value or you transferred your assets into a trust system or any system of transferring your wealth for the purpose of becoming eligible for the nursing home program depriving the state of all your obtainable resources for your long-term health care.**
THE SOCIAL CHANGE AT HAND ON HOME EQUITY
According to the National Council of the Aging, 81% of Americas 13.2 million households aged 62 and over own their own homes. Seventy-four (74%) of those seniors own their homes free and clear. Altogether seniors own nearly $2trillion worth of home equity.* You got to hand it to the government to help you figure out how to use it.
They want you to use the equity in your home to pay for your own long-term health care! They are going to make it super-easy for you to borrow against it or reverse mortgage your way to creating a new government sponsored reverse mortgage industry. Based on this perceived wealth, it will not be long before government will mandate look back provisions of 10 years for most asset transfers to 20 years for real estate character.
WHATS A REVERSE MORTGAGE?
A Reverse Mortgage (RM) is a special kind of loan which can be obtained if you are at the minimum 62 years of age (if married, the youngest must be at the minimum 62) and own your own home, condo, or co-op. A Reverse Mortgage (RM ) converts a portion of the value (equity) of a home into moment cash. The main characterize of this program is that you need not qualify for credit to acquire this loan.
The money borrowed can be in one lump sum, monthly payment, line of credit, or any combination. The Reverse Mortgage is a non-recourse loan. Theres no personal liability to the borrower, their estate, or their heirs. The house is the only collateral and the borrower does not have to make any monthly payments; its the reverse, the bank pays you.
Whats wrong, is that the interest charged on the loan accrues and compounds on itself accelerating the amount of equity being removed from the home, not to mention the extravagant forced fees charged when theres no other different. Whats wrong with Reverse Mortgages is that the financial dignity of the senior will quickly evaporate, before their very eyes.
WHAT CAN YOU DO NOW TO AVOID THE GOVERNMENT MANDATED CONFISCATION OF THE MEDICAID NURSING HOME use-DOWN PROGRAM?
Good planning is done when the seas are calm; its often too late when the seas are stormy. It has become obvious that government has outspent their income and produced more money with printing presses. As a boomer myself, I just dont like it when big brother has plans for my earnings and accumulated wealth.
The more money you throw at them the more they want, its a black hole of the universe. If Government wants us to buy our own long-term health care, then why not make it tax deductible. Why on form 1040 heath care costs have to go beyond 7.5% of modificated gross income. Why not make deductions for long term care insurance 100% tax deductible, or better in addition why not make it affordable.
*Source: Stephen A. Moses, Cato Institute, Policy examination, No. 549, Aging Americas Achilles Heel Medicaid Long-Term Care.
**Transferring assets at less than its fair cash value i.e. transferring your home to your child for $100.00 is either considered a taxable gift in excess of the allowed $12,000 annual exclusion or its considered a fraudulent conveyance. See tax form 709 for gift tax consequences, see your lawyer for how to avoid fraudulent conveyance, or call Rocco Beatrice at 888-93ULTRA (888-938-5872) for a free consultation.