What is Medicaid Payback?
Medicaid payback, or what some people refer to as Medicaid estate recovery or Medicaid clawback, is the process in which state Medicaid programs seek reimbursement for long-term care costs paid on behalf of a Medicaid recipient after their death. This is a part of the Medicaid Estate Recovery Program, or MERP, applied to people 55 years or older and those who are considered permanently institutionalized.
The primary purpose of Medicaid payback is the recovery of money spent on long-term care services. These include:
- Nursing facility services
- Home and community-based services
- Related hospital care
- Prescription drug costs
Note that Medicaid payback applies only to these named services and not all Medicaid benefits accrued in a person’s lifetime.
How Does Medicaid Payback Work?
The Medicaid payback process typically begins after the death of a Medicaid recipient. The state’s Medicaid agency will send a letter to a family member of the deceased, often the beneficiary or executor of the estate, requesting reimbursement for the long-term care Medicaid previously paid.
Things to remember about Medicaid payback:
- The state may only recover an amount it actually paid on behalf of the recipient.
- Recovery is made from the deceased person’s estate, including the home, if that is the only major asset the person had.
- There is no Medicaid payback if the recipient has left a spouse who survives them.
- There is a typical one-year timeline following the recipient’s death when a claim can be made for estate recovery.
Protecting Your Assets from Medicaid Payback
While Medicaid payback may sound somewhat overwhelming, there are a couple of ways you can protect your assets. Following are some of the effective methods to do so:
1. Asset Protection Plan
An asset protection plan is a must for preventing your savings from Medicaid payback. The plan should include a strategy for transferring the assets to family members or loved ones and still remaining eligible for Medicaid.
Following are a few options you can consider:
- Asset protection from Medicaid by the creation of a trust.
- Converting countable assets to exempt assets, for instance, prepaying funeral expenses, buying an exempt annuity, or making home improvements.
2. Medicaid Asset Protection Trust (MAPT)
A Medicaid Asset Protection Trust, or MAPT, is an irrevocable trust created specifically to protect assets from being counted for Medicaid eligibility. In many states, properly structured assets held in a MAPT are not considered countable assets for Medicaid eligibility.
Key features of a MAPT:
- Must be irrevocable
- Once placed into the trust, the assets are no longer controlled by or accessible to the original owner.
- Assets in the trust are protected from Medicaid payback.
3. Review and Update Estate Planning Documents
Another important step in keeping Medicaid payback at bay from your assets involves regularly reviewing and updating all estate planning documents. This involves the following:
- Updating your will
- Reviewing the revocable trusts
- Updating powers of attorney
- Having all legal documents reflect your current financial situation
4. Consider Long-Term Care Insurance
For instance, if you were to invest in long-term care insurance, this could provide the funds needed for nursing homes, assisted living facilities, and home health care. This will reduce the amount of savings that will be spent on these costs, hence protecting more of your wealth from potential Medicaid payback.
5. Strategic Gifting
Gifting your assets is another effective way of depleting your assets that are subject to Medicaid estate recovery. The current federal gift tax law allows you to gift a certain amount each year without incurring a gift tax. However, this option should not be pursued without consulting with an elder law attorney due to the potential for unintended consequences.
6. Understand Medicaid’s Look-Back Period
Medicaid has what’s commonly referred to as a look-back period, generally five years, in which they review all transfers of assets. Transfers during this period may well be subject to a period of Medicaid ineligibility. It is thus cardinal that one plans well in advance and seeks the services of an experienced attorney to help navigate this complex area.
Proactive Planning is Key
Medicaid payback is a complicated process that hugely affects your estate and the amount that your heirs will receive. However, with some proper planning and strategies, one can protect part of his or her assets while still qualifying for needed long-term care services.
At Antanavage Farbiarz Attorneys at Law, we guide our clients through the complexities of Medicaid planning and asset protection. Understanding Medicaid payback and taking proactive steps will ensure that your hard-earned assets are protected and your legacy preserved for future generations.
Remember, the bottom line with Medicaid planning: The sooner, the better. The compassionate attorneys at Antanavage Farbiarz are ready to help you protect your assets, give us a call at (610) 562-2000 or click here to schedule a consultation.
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