When to Apply for Medicaid Long Term Care: An Inside View for Industry Professionals

Article Summary

To ensure a seamless transition from private pay to Medicaid, in our experience, families should begin planning for a Medicaid long term care application a minimum of 6 months prior to their actual need.

The reasons for this extended planning period are many. To begin, this ensures that care providers (if they accept Medicaid) continue to receive payment without gaps or having to rely on increasingly fickle retroactive Medicaid payments. For persons transitioning to a new Medicaid provider, this ensures there is adequate time to find that provider. Included in the long list of things that cause Medicaid approval delays are difficulty obtaining Powers of Attorney, financial paperwork, complicated family dynamics, inaccurate Medicaid denials, HCBS Waiver wait-lists, lack of Medicaid beds, forgotten assets, gifting penalties and difficulties liquidating assets (the dreaded time-shares and RVs). Last and alarmingly common are Medicaid office delays and loopholes that allow administrators to extend well beyond the 90-day decision window allowed by law.

For those thinking when is the best time to apply from a financial resources remaining perspective, the 6-month time window can easily be recalculated as a dollar figure by simply multiplying their monthly cost of care by 6 and adding their state’s asset limit ($2,000 in most states). For example, an applicant private paying $8,000 / month for nursing home care should begin when their savings approach $50,000 (6 x $8,000) + $2,000). A different approach should be used for married candidates that use the Community Spouse Resource Allowance.

---

Hearing from a client who is panicked because they need to submit a Medicaid application on short notice is fairly common for industry professionals like care managers, nursing home administrators and home care providers. The client has realized they or their aging parent is about to run out money, which means they need Medicaid as soon as possible so they can receive the care they need.

To help these clients make a smooth transition from private pay to Medicaid and avoid the stress of a last-minute application, it’s best to begin the application process before there are only a month or two of funds remaining. The ideal time to apply for Medicaid depends on two factors – an individual’s monthly cost of care, and how long it will take them to complete the application process and start receiving benefits.

As most industry professionals know, Medicaid is meant for people of limited financial means, so applicants must be below certain asset and income limits to qualify. As you also know, these limits can vary by state, as can all of Medicaid’s rules, and certain assets (like one’s home) and incomes (like certain annuity streams) don’t always count against the financial limits. The applicant’s marital status and what type of Medicaid they’re applying for also make a difference.

We have found that it takes clients, on average, about 6 months to complete the application process and start receiving benefits. Many clients need benefits sooner than that, and we can often accommodate them, and sometimes it all takes longer, but 6 months is the average.

The most common cause for delays in the application process, in our experience, is the client’s ability to gather all the required paperwork. We regularly see adult children of Medicaid applicants struggle to access or locate all of their parent’s financial documents. A Power of Attorney might be needed, which takes time, and is sometimes made more difficult by an aging parent’s mental condition. There may be joint assets that require action from a family member who is unresponsive or uncooperative. Forgotten assets are another common delay, as are penalties from gifting.

Once the application is completed and submitted, states are required by law to respond within 90 days. In the past, most states would take close to the full 90 days to respond, but since the onset of the COVID-19 pandemic, we’ve found response times becoming faster and the average response time is now closer to 45 days. However, it’s important to note that some states have loopholes that allow them to delay their response and push it past the mandated 90-day limit.

The faster response time from states is welcome because most applications are initially denied. In states with the strictest application procedures, we find that only single applicants with straightforward financial portfolios are accepted on the first try. Like most things Medicaid, the application denial rate varies by state, but it ranges from 60-90%, even when the applications are prepared by professionals. When individuals apply on their own, acceptance on the first attempt is rare.

Some denials require only a simple fix, and many states will leave the case open for a short window of time (30-60 days, for example) to allow for corrections. Some denials require a complete re-application, which means the state can re-start the clock on the mandated 90-day response time after a second application has been submitted.

The denial and re-application variables are part of our 6-month estimate when it comes to how long it will take to complete the application process. Knowing that, and your client’s financial situation, provides you with the numbers needed to calculate the ideal time for your client should apply for Medicaid.

Let’s use a hypothetical Illinois resident, we’ll call her Mary, as an example. The asset limit in Illinois for a single applicant like Mary is $2,000. Mary spends about $8,000 per month in living/health care expenses. So, Mary should apply for Medicaid when she has about $50,000 in cash/assets remaining. Here’s the calculation: 6 months x $8,000 per month = $48,000 + $2,000 asset limit = $50,000.

Medicaid candidates may be concerned about being slightly over the asset limits if they begin the application process 6 months in advance of running out of money. However, they should not be concerned as this scenario can easily be dealt with through a variety of planning techniques including application date targeting, gifting, planning for penalties or purchasing funeral trusts. Of course, some states have structured spend-down which can make it a non-issue entirely.

The calculation is different for a married applicant because the allowable assets level is significantly higher due to the Community Spouse Resource Allowance (CSRA). The amount allowed for the CSRA is state-specific and changes annually. Given these and the other variables associated with the CSRA, it is recommended that married individuals who require long term care should consult with a Medicaid planning expert regardless of their level of countable assets.

Medicaid Pending and Retroactive Medicaid

There are two options that allow for some cushion when it comes to timing the Medicaid application process – Medicaid Pending and Retroactive Medicaid. However, both options have their limitations.

When an individual has applied for Medicaid but has yet to be approved or denied by the state, they have “Medicaid Pending” status. Nursing home facilities continue to provide services and care to Medicaid pending individuals as long as they are current residents of the when they apply. This eliminates the timing variables associated with application denials and state response times. Medicaid pending nursing home residents are required to give the majority of their income to the state to help cover the cost of nursing home care, just like Medicaid nursing home residents whose applications have been approved.

However, the Medicaid Pending status has at least two drawbacks. First, an applicant must have submitted their application to have Medicaid Pending status, and as we have discussed, pre-application gathering of financial documentation is one of the largest obstacles and time delays. Second, Medicaid beds in nursing homes can be difficult to find, nursing homes that accept Medicaid pending applicants are even more rare and families will have very little flexibility in finding a nursing home that works for them and their loved one in their preferred geographic area.

Retroactive Medicaid helps pay for care costs for your clients during the 3 months prior to submitting their application as long as the applicant can demonstrate they should have been eligible during this period. This allows a greater margin of error when trying to calculate the ideal time for your client to apply for Medicaid. However, Retroactive Medicaid reimbursements are notoriously fickle, difficult to contest, and states are increasingly limiting the retroactive period or eliminating retroactive payments altogether. As of 2019, 27 states had applied to make changes to their Retroactive Medicaid policies and while not all have done so (given COVID-19 distractions), a clear trend has emerged.