Planning For Medical Assistance: A Starting Point On What You Need To Know

December 29, 2020

Medical Assistance, Minnesota’s version of Medicaid, provides more than 600,000 Minnesotans with coverage monthly.  Many of these individuals are seniors.  When looking forward to retirement, it is important to consider future health care needs as well as how such needs will be paid for.  This includes possible long-term care.  While private options, such as out-of-pocket spending and long-term-care insurance are possible for a period of time, national statistics indicate the majority of Americans will have some need for government-backed health coverage as they age.  The Kaiser Family Foundation, a non-profit organization that focuses on national health issues, found that Medicaid is the primary payer for both institutional and community-based long-term services and support.  This is partly due to the limited coverage under Medicare and few affordable options in the private insurance market.  While many individuals may not initially qualify for Medical Assistance due to income or asset levels, they know they will eventually need coverage.

The rules and regulations for the Medical Assistance program are complex and can change often, including the calculation of income and assets (which affects eligibility).  Some factors that affect the calculations are marital and veteran status.

The application process, completed through the local county office, is only the first step.  Attempting to “spend down” assets to meet the threshold of Medical Assistance can have negative affects if not planned carefully.  Minnesota has a five-year “look back” period for asset inclusion.  That means Minnesota looks back five years for any assets sold or transferred for less than fair market value (including gifts).  Minnesota then implements penalties related to the amount of value lost in the transfer.  Penalties result in a period where the applicant is not eligible for coverage.  There are some exceptions, such as certain transfers to spouses or qualifying children, but the law is intricate.

This “look back” period makes estate planning critical.  Gifts of non-exempt assets need to occur well before the application for Medical Assistance and the need for coverage.  Non-exempt assets, even if illiquid (such as agricultural land) remain assets for purposes of eligibility.  Gifting may have tax implications or affect other plans you have made, such as any arrangements regarding trusts.  Make decisions early, in consultation with your financial advisor and your attorney, to best protect your eligibility for Medical Assistance and to make sure your family is well taken care of.

This information is general in nature and should not be construed as tax or legal advice.