Some forms of Colorado Medicaid are deemed so crucial to public health that the state is rather liberal with the benefits. Pregnant women can qualify for prenatal benefits on their current financial circumstances, and children can often receive Medicaid coverage even when their parents don’t qualify for such benefits.
Other individuals who may require Medicaid benefits are subject to far more scrutiny from the state. When older adults apply for Medicaid as a means of covering their nursing home costs, the state will scrutinize their circumstances more carefully than it will the situation of an expectant mother.
Not only will an applicant’s current finances, including their income and total assets, influence their eligibility, but so will their recent financial history, as the state can review years of financial transactions. How far ahead do you need to plan for Colorado long-term care Medicaid coverage to avoid the penalties the state might impose?
The state can look at five years of records
When an individual requires the extensive medical care provided by a nursing home, Medicaid will pay out thousands of dollars a month in coverage. The state has an interest in preventing abuses of the system, so an individual’s recent transactions, including gifts to family members and transfers into trust, are part of the Medicaid review process.
Although giving away assets to qualify for long-term care Medicaid benefits is perfectly legal, it must be disclosed if it occurred within the 60 months prior to applying for those benefits. This is known as the “look-back” period, and it can trigger a period of ineligibility. The state will calculate the total amount of resources transferred during the look-back period and will then impose a period of ineligibility determined by dividing the value of the gifts by the average monthly cost of nursing home care in the state. So, for example, if you gave away $110,000, you might be penalized for 12 months. Although there are strategies to mitigate this result, it can still have dire financial consequences for covering the cost of care.
How advanced planning helps
In many cases, the earlier you plan for future Medicaid coverage, the easier it will be for you to avoid or reduce a penalty. Through gifts or changes to how you hold certain property, you can legally alter your financial circumstances to allow for approval should you ever require Medicaid coverage later in life. This might involve giving away assets and waiting out the look-back period, retitling real estate in a particular way, or just updating your power of attorney to permit Medicaid planning by your agent in a crisis. The process of Medicaid planning can also help protect your assets, including the home where you live, from Medicaid estate recovery efforts after you die. The planning can be complicated, however, and should therefore only be done through an experienced elder law attorney.
Medicaid planning is often a smart additional step to integrate into your overall estate planning process, especially as you prepare for retirement. Reviewing your assets and estate planning documents in light of the possible need for long-term care in the future can help you preserve those assets, if done properly.