A Game Of Numbers

Baseball is a sport where players and fans alike have a strong emotional connection, both positive and negative, to the facts and figures represented by the numbers of the game. For instance, most every baseball fan thinks back to Ted Williams’s seemingly unrepeatable 1941 season when they hear the number .406. We picture Hank Aaron slugging a monster home run when we hear the number 755. Everyone knows that the number 60 represents Babe Ruth and his long-standing home run record from 1927.

On the other hand, some have a strong negative reaction when they hear the number 762 (the current home run record held by Barry Bonds), the number 66 (Sammy Sosa’s single season home run total in 1998), and the number 70 (Mark McGwire’s home run total that same year) because of the scandals that followed those controversial sluggers as they chased baseball’s most sacred records.

The 2003 book Moneyball illustrates numbers in baseball with the story of the Oakland Athletics and its general manager, Bill Beane, whose analytical sabermetric approach to staffing a baseball team based almost entirely on statistics resulted in huge payroll savings but amazing rewards in the form of multiple playoff berths despite its small-market revenue.

In the field of Elder Law, Medicaid is another area where a good understanding of the numbers can lead to huge savings. This field is full of misinformation to the detriment of those most in need of financial help – seniors who require nursing home care. Here is a summary of some of the most misunderstood numbers in Medicaid.

The Number 5

In baseball, most who hear the number five think of Yankees great Joe DiMaggio. The number five is relatively well known in connection with Medicaid, too. Most people looking into Medicaid have heard about the infamous five-year look back, but many don’t understand what it means.

Medicaid rules require applicants to disclose all gifts they made within the five years preceding the submission of an application. Medicaid imposes a transfer penalty on applicants who gave away assets during this look back. Many believe that giving away assets of any amount during the look back means they cannot qualify for Medicaid for five years. That is not true.

The five year look back is nothing more than a window through which Medicaid looks to see what an applicant did with assets prior to application. In most cases, it does not mean that an applicant who gave away assets during the look back cannot qualify for benefits for five years.

The Number 5,277

The number 5,277 represents the average price of a nursing home in Arkansas as of the last analysis in 2016. More importantly, it represents the current penalty divisor used by Medicaid. When an applicant for Medicaid transfers assets during the five-year look back, Medicaid rules impose a transfer penalty against that applicant. The transfer penalty is determined by dividing the total amount transferred by the current divisor. The resulting number is the period of months during which Medicaid will provide no assistance with nursing home costs.

For example, if an applicant gave away $53,000 during the five-year look back, then applied for Medicaid after being otherwise qualified, Medicaid rules instruct that the applicant should receive a Medicaid approval with a ten-month transfer penalty ($53,000 divided by 5,277).

Transferring assets during the five-year look back does not result in a Medicaid denial, nor does it result in a five-year wait for coverage. It simply results in a transfer penalty.

The Number 2,205

When it comes to Medicaid coverage, Arkansas is an income cap state, meaning any applicant with gross monthly income in excess of the current cap, which is $2,205 per month, should be denied. However, in reality, no properly informed nursing home resident should ever be denied Medicaid because of income.

Medicaid applicants with income over the current income cap can utilize something call an Irrevocable Income Trust (more commonly known as a Miller Trust) to bypass the income limit. Many people know just enough about Medicaid to assume they’ll be denied coverage because of their income but don’t realize there is a legal way around the cap.

Conclusion

Working with someone who understands the Medicaid numbers can pay great dividends when planning for nursing home costs. Don’t miss out on this benefit because of a lack of good information.