Can a resident in assisted living pre-pay several months of room and board and care as a way of spending down the money to qualify for Medicaid?
No, an assisted living resident cannot pre-pay several months of room, board, and care as a way to “spend down” excess assets to qualify for Medicaid.
To begin, Medicaid has an asset limit, which must be met in order for an applicant to qualify for benefits. At the time of this writing, in most states, the asset limit is $2,000. (To see state specific asset limits, and other Medicaid eligibility criteria, such as income limits and functional need, click here). While several higher valued assets, such as one’s primary home, household furnishings, and vehicle, are generally exempt from this asset limit, it is not unusual for an applicant to still have assets over Medicaid’s limit. When this happens, it is not automatic cause for Medicaid denial, but the “excess” assets must be “spent down” until the asset limit is met.
When spending down assets, it is crucial that one does not violate Medicaid’s look-back period, a period of 60-months (30-months in California) that precedes one’s Medicaid application date for long-term care Medicaid. During this timeframe, Medicaid scrutinizes all asset transfers to ensure cash and other assets were not given away or sold under fair market value in an attempt to meet Medicaid’s asset limit for qualification purposes. If this has been done, one will be penalized with a period of Medicaid ineligibility. Therefore, one must exercise caution when spending down assets to qualify for Medicaid.
As mentioned above, pre-paying for room, board, and care in an assisted living residence is not an option for spending down assets that are over Medicaid’s asset limit. This is because paying for services in advance (or in advance of receiving a benefit) will be considered a gift, violating Medicaid’s look back rule. Potentially, if one pre-pays for assisted living costs, he / she is able to move from the residence and have any remaining pre-paid money refunded. This is why it isn’t an allowable way to spend down excess assets. One could, however, pay for his / her assisted living costs on a month-to-month basis until his / her assets have been “spent down” to the asset limit.
To be clear, there are some cases in which a Medicaid applicant can make pre-payments as a means to spend down assets, such as paying off one’s mortgage or a car loan. (This is because the money cannot be refunded). Other ways to spend down assets without violating the look back rule include buying personal items, such as new clothing and furnishings for one’s assisted living room, or purchasing an irrevocable funeral trust.