The Top 8 Mistakes People Make with Medicaid Qualification

The Top 8 Medicaid Mistakes (and How to Avoid Them)

The process of qualifying for Medicaid to pay for long-term care is notoriously tricky and confusing. For families in a crisis, it’s a high-stakes journey where a single misstep can cost tens of thousands of dollars. Below, we outline the eight most common and costly mistakes we see families make and explain how proactive planning can help you avoid them.

1. Thinking It’s Too Late to Plan

This is the most frequent and costly misconception. Many families believe that once a loved one has moved into a nursing home, their only option is to privately pay until their savings are gone. This is false. It is almost never too late to take legal steps to protect assets, even after admission to a facility.

2. Giving Away Assets Improperly

In a panic, many people start giving money or property to their children, hoping to quickly “spend down” to the eligibility limit. This is a disastrous mistake. Medicaid has a strict five-year look-back period for any asset transfers made for less than fair market value. These gifts will trigger a penalty period, making your loved one ineligible for benefits for a period of time, often when they need it most.

3. Not Understanding the Protections for Spouses

Medicaid law includes powerful protections to prevent the spouse who is still living at home (the “community spouse”) from becoming impoverished. These rules are complex but allow the community spouse to keep a significant portion of the couple’s assets and income. Failing to take full advantage of these spousal protections is a common error that can be avoided with professional guidance.

4. Ignoring Legal “Safe Harbors”

The law allows for certain transfers that are exempt from the five-year look-back penalty. These “safe harbors” are not widely known but can be powerful tools. Allowable transfers can include moving assets to a disabled child, a caretaker child who has lived in the home, or into a specialized trust. These exceptions are complex and must be executed perfectly to be valid.

5. Applying Too Early

It may seem counterintuitive, but filing a Medicaid application too soon can be a major mistake. If you have made gifts within the look-back period, filing the application starts the clock on your penalty period. An experienced attorney can analyze your specific situation and advise you on the optimal time to file to minimize or avoid a penalty.

6. Applying Too Late

Conversely, waiting too long to apply can mean the loss of many months of benefits. If your loved one is eligible, every month you delay is a month you are paying for care out-of-pocket that could have been covered by Medicaid. This can result in a loss of thousands of dollars that could have been preserved for the family.

7. Misunderstanding How Medicaid Treats Your Home

Many people fear that Medicaid will take their home. During your lifetime, your primary residence is typically an exempt asset and will not prevent you from qualifying for benefits. The real risk is estate recovery—the state’s right to seek reimbursement from your home after you pass away. However, with proactive planning, there are legal strategies that can protect your home from estate recovery.

8. Trying to Go It Alone

Medicaid planning is a highly specialized field of law. Trying to navigate this complex system on your own is penny wise and pound foolish when a lifetime of savings is at stake. An experienced elder law attorney deals with these issues every day and can guide you through the process, avoiding costly errors.

A comprehensive plan for your long-term care is the best way to protect your family. This is the core of strategic Medicaid planning. Call our office at (919) 256-7000 to schedule a consultation.