Medicaid planning: How not to lose clients to a health crisisArticle added by Mike Anthony, JD on November 6, 2012
Mike Anthony

Mike Anthony, JD

Cleveland, OH

Joined: October 23, 2012

Most of the time, the only call the financial advisor receives is when the client needs to move all their money into a Medicaid-compliant annuity to avoid the spend down. You watch your client and their money you have under management fly straight out the window through no apparent fault of your own.

Let me know if this sounds familiar. You have a long-time client who you’ve worked with for several years. Maybe you helped them invest their money for retirement or you were instrumental in rolling over their 401(k). Sure, they should have bought long-term care insurance, but they’re like most people and just didn’t.

Then you get the call one day. The husband’s had a stroke and is in a nursing home. The family knows that Medicare’s 100 days of coverage will run out soon and they have way too many assets to qualify for Medicaid. In fact, that’s why you get the call. The family is trying to figure out how much money they have available to “spend down” on nursing home costs.

Do you know how the Medicaid spend down works?

Did you know that in many cases, assets can be shifted to the healthy spouse or converted into an income to the healthy spouse and allow the married spouse to re-accumulate the income while still allowing the spouse in the nursing home to remain fully eligible for Medicaid coverage?

Most of the time, the only call the financial advisor receives is when the client needs to move all his money into a Medicaid-compliant annuity to avoid the spend down. You watch your client and his money you have under management fly straight out the window through no apparent fault of your own.

In the process, you’ve missed an amazing opportunity to be a more thorough advisor to the clients and help guide them through the Medicaid eligibility process. In a majority of Medicaid planning cases, even when an attorney is involved in the planning process, there is a need for a financial advisor to help with eligibility by providing protected and life insurance funded funeral trusts and Medicaid-compliant annuities. Many times, assets under management can also retain their original form by being transferred into a spousal annuity trust that works in a similar manner to a Medicaid-compliant annuity.

Medicaid planning is growing every year

If this scenario doesn’t already sound familiar, it will soon. The frequency of Medicaid planning cases continues to grow. Eighty million Americans will be over 65 by 2040 and over half of them are expected to require some kind of long-term care.1 That’s not just going to affect your clients; it will affect your future clients, the people who you want to be your clients, and your own extended friends and family members. With the cost of an average nursing home bed over $6,000 per month — just slightly less expensive than booking a suite at the Ritz — you can’t afford to miss the opportunities to help the people with whom you come into contact.
You can help your clients

Federal regulations allow the patient to choose anyone — even a non-lawyer — to help with filing the Medicaid application.2 Heaven forbid you don’t understand the impact of your advice on your clients’ eventual Medicaid eligibility; many advisors are being sued because their advice was inconsistent with solid Medicaid planning principles and we want to help you avoid that.

Some advisors don’t want to get that involved, but at the same time, they don’t want to hand their clients over to complete strangers or competing advisors to solve their Medicaid planning needs.

It is my opinion that if you have clients age 60 and older who have a net worth of less than $1 million dollars, you need to learn at least the basics about Medicaid planning (although learning the subject in detail would be much better for you and your clients).

I can state with confidence that advisors who take the time to study this subject matter can learn it. With an aging society, the question isn’t if advisors will have to learn this subject matter, the question is when are they going to learn it? I would submit to readers that the sooner the better (for advisor and for their senior clients).

Team work

I do not suggest that financial planners or insurance agents try to put together and implement Medicaid plans for their clients without using a team to do so. That team should most certainly include an attorney who “gets it.” If you do not currently have a team you feel comfortable working with, there are numerous resources available to guide you in finding a local attorney.

1 Centers for Disease Control and Prevention, National Center for Health Statistics. Health, United States, 2005: With chartbook on trends in the health of Americans. Hyattsville, MD: Centers for Disease Control and Prevention 2005.

2 42 C.F.R. sec. 435.907 and 435.908. Note, however, that Texas state law – contrary to Federal law – prohibits a person who is not licensed to practice law in Texas from charging a fee for representing or aiding an applicant or recipient in procuring assistance from their state Medicaid department. TEX HR. CODE ANN. § 12.001
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