Aging in place and remaining independent are often top priorities for many older adults preparing for retirement. People in their golden years want to enjoy their health and their independence. Many people base their retirement plans on the assumption that they remain in their own homes. Unfortunately, those goals are not always easily achievable.
Medical issues are common as people age. They may have physical challenges that make independent living difficult. In cases where people experience cognitive decline, they may need others to help them manage their affairs. Long-term care can sometimes involve home health aides providing support to people living independently. Others may move into nursing homes and similar facilities.
People never know what may happen to their health as they age, which means they need to plan for every eventuality for optimal protection. Preparing for the possibility of long-term care needs often means planning in advance for Medicaid benefits. Why do people have to plan before they apply for Medicaid?
Qualifying for Medicaid is a challenge
While most retired adults are eligible for Medicare benefits based on their employment history or marriage, Medicaid is less universal. The program has very strict limits on both income and countable assets. People usually only qualify when they have limited resources and significant medical support needs.
Older adults trying to plan at the last minute for Medicaid may unknowingly put themselves at risk of a penalty. The state reviews five years of financial records when people apply for Medicaid for long-term care.
Any large gifts or transfers during those five years can lead to a penalty. The state expresses the penalty as a set number of months during which Medicaid coverage is not available. Older adults with no resources may struggle to cover their costs until the penalty period ends.
Additionally, once older adults qualify and start receiving benefits, they are subject to rules about repaying those benefits. Any assets that remain in their estate after their passing could be vulnerable to Medicaid estate recovery efforts.
Planning at least five years in advance before seeking Medicaid benefits allows people to qualify quickly and preserve their resources. Even those who hope to avoid long-term care may benefit from establishing plans in advance in case their health declines.