Medicaid Planning FAQs

• • What is Medicaid?

  • Medicaid is a healthcare program that is primarily funded by the U.S. federal government, administered by individual states, and applied for in your county. Consequently, the eligibility guidelines and benefits offered vary from one state to the next. Most states, including Arkansas, offer different categories of Medicaid, such as Medicaid for children, pregnant women, and the aged and disabled.

• • What is the difference between Medicaid and Medicare?

  • People often confuse Medicaid and Medicare and/or use the two names interchangeably. Although both offer healthcare benefits, they are two different programs. Like Medicaid, Medicare is funded by the U.S. government but is also administered by the federal government. Medicare is an entitlement program, meaning that if you paid into the program during your working years, you are automatically entitled to benefits when you turn 65. Medicaid, on the other hand, is a “needs-based” program, meaning you must demonstrate a financial need for the benefits offered by the program.

• • Why might I need to qualify for Medicaid during my retirement years?

  • With each passing year, your odds of needing long-term care (LTC) increase noticeably. At retirement age (age 65) you already stand at least a 50 percent chance of needing LTC before your death.  By age 85 those odds will have increased to a 75 percent chance. As of 2021, the average monthly cost of LTC in Arkansas was about $6,600. With an average length of stay of three years, you could be facing an LTC bill of over $200,000. Making matters worse is the fact that neither Medicare nor your basic health insurance coverage will cover LTC expenses, leaving you to pay out of pocket unless you are eligible for Medicaid.

• • What are the basic Medicaid eligibility requirements?

  • Each state develops its own eligibility requirements; however, they are similar from state to state. Aside from proving citizenship (or another legal status) and residency, the primary eligibility requirements for Medicaid involve demonstrating a need for benefits. To do that, you must have income and “countable resources” that do not exceed the program limits. For many seniors who did not anticipate the need to qualify for Medicaid, the countable resources (asset) limit presents a problem because in Arkansas the limit is just $2,000 for an individual applicant.

• • Are all my assets considered when determining my eligibility for Medicaid?

  • Each state decides what assets are exempt. In Arkansas, examples of exempt assets for Medicaid eligibility purposes include:

    • • Your primary residence (up to $688,000 as of 2023) if you have an intent to return home
      • Household goods and furnishings
      • One vehicle
      • Term life insurance policies with no cash surrender value
      • Burial plot

• • Can’t I just transfer assets to my adult children if I need to qualify for Medicaid?

  • There was a time when this was an option; however, Medicaid imposed a five-year “look-back” rule that now prevents an applicant from transferring assets in anticipation of the need to qualify for Medicaid. The look-back rule allows Medicaid to review your finances for the five-year period leading up to your application. Any transfers for less than market value will likely cause Medicaid to impose a waiting period. The length of the waiting period is determined by dividing the value of your excess assets by the average monthly cost of LTC in your area. During the waiting period, you will be expected to rely on your excess assets to cover your LTC expenses.

• • How can Medicaid planning help me?

  • Medicaid planning incorporates legal tools and strategies into your estate plan to protect your assets and ensure that you will be eligible for Medicaid benefits if you need them in the future. It is among the most important estate planning components if you cannot afford to cover LTC costs out of pocket. This planning will protect your hard-earned assets and provide you with peace of mind during your retirement years.

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We are here to help!  If you would like to discuss Medicaid planning strategies with a licensed elder law attorney, you can send us a message to request a consultation appointment, and we can be reached by phone at 479-443-0062.