Besides being a health and wellness issue, Long Term care is also a housing issue. If your loved one is on Medicaid but unable to continue residing in their home, a family may decide to sell the home. Under the existing Community Based Medicaid Home Care or ALP Level 3 rules, whether a parent moves in with an adult child, rents an apartment or joins an assisted living, the home could be sold and the proceeds transferred to family or a Medicaid Irrevocable Trust without a penalty.
It gets trickier with respect to Nursing Homes. Admission to a nursing home designates the person’s house as an available resource for Medicaid purposes unless an Intent To Return Home Letter is included in the Medicaid Application. An Intent To Return Home Letter is designed to inform Medicaid that the Applicant does not wish to stay in the nursing home permanently. Their desire is to live and recuperate at home. Medicaid allows a six-month window to exempt the person’s home from becoming an available resource. During those six months, either the person is able to return home or not. If not, the home can be sold and the proceeds can be partially protected with a Medicaid Approved Promissory Note.
Promissory notes, in a Medicaid context, utilize a gift and loan combination that can save approximately half of the proceeds while the other half is used to pay the nursing home along with their regular income during the penalty period created by the gift.
New Medicaid transfer regulations in New York will take effect in 2022. These new rules will impose transfer penalties for Home Care and ALP Level 3 Medicaid Applications starting January 1st at the earliest. This means that Medicaid applicants filing after January 1, 2022 may have to use Promissory Note Planning to sell a home while under any type of Medicaid Long Term Care program.
Understanding how penalties are calculated is very important. The 2021 Regional Medicaid Rate for Putnam County is $13,206. Regional rates reflect the average Nursing Home cost in a specific region of New York State. This Regional Rate figure is divided by the total dollar amount of resources gifted or transferred to a person or Trust within the lookback period (5 years for Nursing Home and soon to be 2 and one-half years for Home Care and ALP Level 3). For example, let’s say a parent’s home is sold and after the mortgage is satisfied, the remaining proceeds total $132,060. For a Nursing Home Medicaid recipient, this amount has to be transferred so that they can retain their eligibility. Dividing the proceeds by the Regional Rate ($132,060 /$13,206) equals a 10 month penalty.
This means that the family has to pay the Nursing Home privately for 10 months. The actual Nursing Home Cost may be greater than the Regional Rate, so that 10 month penalty may incur Nursing Home costs well in excess of $132,060. Promissory notes can reduce the penalty period while providing a partial gift of the proceeds.
Contact the professionals at Sloan and Feller today to review all of the Medicaid law changes and how they impact a Medicaid recipient’s residence.