In Minnesota, the program that pays for long term care is called Medical Assistance, commonly referred to as MA. Other parts of the country call it Medicaid. It’s the same program, but each state has some different rules. When it comes to MA, giving assets away is referred to as “gifting” and “uncompensated transfers”. Gifting of any assets can make a person ineligible for MA. The “lookback” period for gifts is 5 years plus the month of application. Gifting is a gamble because your health could hold out or it could not during this lookback period. If you gift to anyone other than your spouse and then need to apply for MA within 5 years and 1 month of the gift, you will most likely be ineligible for MA to pay for your cost of long term care, at least for a period.
There are really two parts to your question. One is gifting, and the other is that you must be financially eligible to receive MA. Eligibility limits vary, depending on age, household size, and other factors. Most people become eligible by spending down. A MA spenddown means using your own financial resources to pay your medical costs until you are eligible for MA to pick up the costs. The spenddown of course leaves you with limited financial resources.
Please note: the asset and income guidelines are different if you are married. The MA rules don’t want to impoverish the well spouse, called the “community spouse”, so the rules allow the community spouse to shelter more assets and income for his or her use. For simplicity’s sake, this article talks about the MA for a single person.
When you apply for MA, the county will look for any gifting during the lookback period. If you have gifted within the lookback period, a formula is used to figure out how many months you will be ineligible for MA. The formula is this: the value of any gifts given in the lookback period are added together. That sum is then divided by the current figure for the average monthly cost of nursing home care - currently around $8,412. (This number changes on July 1, 2021. You can find updated information at http://hcopub.dhs.state.mn.us/epm/#t=appendix_f.htm.) The resulting figure is the number of months you will not be eligible for MA, running from the date of your application.
Here is an example of how this might look in real life for a single person, if you needed nursing home long term care paid for by MA.
Let’s say that before you needed nursing home care, you had $100,000 in countable assets, and you gifted $40,000 to your child, leaving you with $60,000 in assets to live on. Later, you need long term care at the nursing home, but you would be privately paying until you spent that down close to $3000. At that point, you could apply for MA to help cover the cost of your care. (Note: Once on MA, your income will contribute to your cost of care except for a small personal needs allowance that you get to keep each month, currently $104/month. (This number changes on January 1, 2021. You can find updated information at http://hcopub.dhs.state.mn.us/epm/#t=appendix_f.htm).
Here is where the gifting risk comes in. The county will look at any gifting you did during the lookback period. They would divide the total value of the gifts, $40,000, by $8,412, resulting in about 5 months of ineligibility for MA. (The $8,412 number changes on July 1, 2021. You can find updated information at http://hcopub.dhs.state.mn.us/epm/#t=appendix_f.htm.) This is a problem because you’ve already spent down to $3000 in countable assets, so you will not be able to pay for the nursing home costs for those 5 months because nursing home costs for 5 months could be as high as $36,000 or higher. If the person who got the $40,000 in gifts can return the gifts to you, you can potentially “erase” the ineligibility period, by then spending the $40,000 on your cost of care and reapplying for MA when you reached $3000.
If the gifts can’t be given back or if you cannot pay for your care while you are ineligible for MA, you could ask the county for a hardship waiver, but these are relatively rare. Further, the risk with hardship waivers is to the people received your assets as gifts. The county will demand that those people return the gifts to you so that you will have more resources to pay for your care (see above). If your giftees do not return the gifts, the county could sue them for your cost of care during the ineligibility period.
If you feel confident that at your age and current state of health, you can remain healthy for at least 5 years and 1 month, you may still want to gift assets to your children or others. As you consider this, make sure you are realistic about your financial resources and your needs. And since no one can predict the future, it may be best if your giftees hold on to the gifts (rather than spending, selling, or otherwise using them up) in case they must give them back to you to get MA during the ineligibility period. Before doing any gifting, get individual advice from an attorney well-versed about MA.
You can find more information online at mn.gov/dhs/people-we-serve/seniors/health-care
