As we all know, Medicaid is the payor of last resort. Therefore, before Medicaid will provide any benefits on behalf of an individual, he or she must exhaust all outside funding sources, including monthly income from the Veteran's Administration ("VA"). With that in mind, how does a veteran qualify for both Medicaid and VA benefits?
From a Medicaid standpoint, the easiest way for an individual to qualify for benefits it to utilize a Gifting/Medicaid Compliant Annuity plan, commonly referred to as a Half-a-Loaf plan. The goal of the Gifting/Medicaid Compliant Annuity plan is to allow the individual to give away approximately one-half of his or her spend-down amount while retaining the other half to pay for his or her nursing home care.
As many VA practitioners are aware, the VA reduces a single claimant's Aid & Attendance ("A&A") benefit to $90.00 when he or she is in a Medicaid-approved nursing facility and is receiving Medicaid benefits. As such, the A&A benefit would be most advantageous when the veteran is strictly privately paying or his privately paying during a period of Medicaid ineligibility.
The following example is provided to illustrate a Gifting/Medicaid Compliant Annuity strategy:
George, a widower, is 90 years of age, and is a permanent resident of a Michigan nursing home. With countable resources of $152,000, he has a spend-down amount of $150,000. With the nursing home charging $6,500 per month for his care, and with his monthly income being only $1,200 from social security and pension, he has a monthly income shortfall of $5,300. George would like to qualify for Michigan Medicaid benefits as soon as possible.
George consults an elder law attorney and is instructed to make an immediate gift of $81,815.32 and purchase a Medicaid Compliant Annuity with the remaining spend-down amount of $68,184.68. The gift amount of $81,815.32 will cause a Medicaid divestment penalty period of 12.86 months. Utilizing a Medicaid Compliant Annuity, which is structured with 13 monthly consecutive payments, George will receive a monthly payment of $5,275.48 per month, with which he will pay his monthly nursing home bill.
In the alternative, if George meets the criteria of a qualified veteran, and is entitled to the maximum A&A benefit of $1,644, the Gifting/Medicaid Compliant Annuity plan will take that into consideration:
With the nursing home charting $6,500 per month for George's care, and with his monthly income being only $2,844 (social security of $1,200 + A&A benefit of $1,644) he has a monthly income shortfall of $3,656. George meets with an elder law attorney and is instructed to make an immediate gift of $95,875.34 and purchase a Medicaid Compliant Annuity with the remaining spend-down amount of $54,124.66. The gift amount of $95,875.34 would cause a Medicaid divestment penalty period of 15.07 months. Utilizing a Medicaid Compliant Annuity, which is structured with 15 monthly consecutive payments, George will receive a monthly payment of $3,632.30 per month, with which he will pay his monthly nursing home bill.
With George qualifying for A&A and utilizing the monthly benefit of $1,644 to privately pay during the divestment penalty period, he was able to increase his gift to intended beneficiaries by $14,060.02 (2nd Example Gift $95,875.34 - 1st Example Gift $81,815.32). Immediately following the 15.07 month divestment penalty period, George will be eligible for Michigan Medicaid benefits. At the same time, George's A&A benefit will be reduced to $90.00 per month.
Many state Medicaid programs are forcing veterans to apply for VA benefits prior to receiving Medicaid benefits. In light of the enhanced economic result, as show above, the question of whether to utilize VA benefits in a Gifting/Medicaid Compliant Annuity plan is obvious.
Copyright ©2010 Krause Financial Services, Inc.
