Due to a struggling economy in 2009, the Department of Human Services (DHS) released some bad news regarding Medicaid rule changes:
Since January 1, 2009, real estate will no longer be considered to have a $o.00 value after it has been listed for sale for 30 days. Now, according to the DHS, real property must be listed for sale at least 3 months prior to the filing of a Medicaid application. This will have a very negative impact on nursing home residents who have real estate that is a countable asset under the Medicaid rules.
The rule provides that for an asset to have a $0.00 value, it must be shown by:
“[f]or homes, life leases, land contracts, mortgages and any other real property, an actual sale attempt at or below fair market value in the owner’s geographic area results in no reasonable offer to purchase. The asset becomes salable when a reasonable offer is received. For applicants, an active attempt to sell must have started at least three months prior to application and must continue until the property is sold.”
Here is how this rule works. Suppose that a widower named Fred Smith suffers a stroke and after being hospitalized for 1 week, is admitted to a nursing home for rehabilitation. Due to his age (87 years old) and the severity of the stroke, Mr.Smith is unable to return home. Mr.Smith has a modest estate consisting of his home, a small hunting cabin worth approximately $35,000, 1 car, and $10,000 in checking and savings accounts. Under the Medicaid rules, Mr.Smith’s home and care are exempt assets and his bank accounts and cabin must be spent down to no more than $2,000. Under the old rule, Mr.Smith could spend his account down to $2000 by prepaying his funeral and list his cabin for sale. After 30 days, he would be eligible for Medicaid benefits.
Under the new rule, Mr.Smith’s hunting cabin must be listed for sale for three months prior to the filing of the Medicaid application. Since Mr.Smith has only $10,000 in cash assets, unless his cabin is sold (unlikely in this market), he will not have enough money to pay the nursing home expense of more than $6,000 per month. Without financial means to pay the nursing home, Mr.Smith may have to return to his home and depend on his children and grandchildren for his care.
It is easy to see how this rule can create a severe hardship for those who have property they cannot sell and otherwise lack the means to pay the nursing home. Unfortunately policy makers at DHS did not seem to appreciate this reality as a result, some elderly residents and their families may unfairly suffer.
To avoid being a victim of such a situation, be sure to consult with an experienced elder law attorney before placing a loved one in a nursing home.