What is Medicaid Planning?
The purpose of Medicaid planning is to meet the high cost of long term nursing home care. In 2026 the average cost of a nursing home in Michigan is $12,216. See Bridges Eligibility Manual, Item 405, page 14, here. According to the Federal Long Term Care Insurance Program the estimated cost of care is S112,420 per year. Their estimate may be found here.
There are two kinds of Medicaid planning: First “short term” or “crisis planning.” and second, 5 Year planning. Short term means that an applicant is or will be in long term care very soon. In that case Medicaid Planning involves the process of “spend down” of assets till the applicant is eligible for Medicaid benefits. 5-year Medicaid planning contemplates the possibility of long term care in the nursing home. It often involves establishing and funding an irrevocable Medicaid Asset Protection Trust. For more information see our article “Medicaid Asset Protection Trusts Analysis: Right for You? Maybe and Maybe Not,” here.
Both types of planning require that you have trusted others (family members or friends) who will act with integrity in your best interest, if and when you need help. This is accomplished most often with Powers of Attorney for healthcare, financial and property management. For more information on long term Medicaid planning see our article on Medicaid Estate Planning.
What Does Short Term Medicaid Planning Involve?
Pay for medically necessary expensive items
You want your “spend down” to make your home suitable for you even if you are in a hospital bed. You want to be able to pay for expensive home modifications so that it is completely accessible for you and your caregivers. That includes your entrances, stair lifts if your home has more than one level, “handicap accessible” bathroom, kitchen, living spaces and entrance. You want your home wheelchair accessible. You want to be able to afford all the Medical equipment and devices that Medicare does not pay for such as a “hoyer lift.” You might need a handicap accessible vehicle.
Paying for “Assisted Living” in a family member home
This component may not be available in your state, but it should be. The components include: an assessment and plan completed by a geriatric nurse, geriatric social worker who may be an Aging Life Professional. The plan must be recommended by the treating physician and carried out with the assistance of an Elder Law Attorney – Medicaid lawyer. For example, under such a plan you may be able to pay “assisted living” rent to live in a child’s home. Or you may be able to pay your child the commercial fair market value for her/his services. You will need to work with a CPA on the tax issues.
Medicaid Annuity?
Maybe. The standard annuity does not help the person applying for Medicaid since the annuity payments must first go toward paying medical expenses then Medicaid picks up the remainder. An “IRA annuity” may work if your state plan will “allow” annual payments. (It should). For example with one annual lump sum payment the nursing home or in-home medical care will be paid for and then you have funds that may be sheltered. See your Elder Law Attorney on this point.
A spouse non-IRA annuity? It can be a good idea since it converts assets into income. It may not be good for low income spouses who would otherwise receive income from the spouse Medicaid applicant. It is good for high-income spouses who would not receive a spousal income allowance by Medicaid.
Court Order of Support
One requirement for all states Medicaid programs is that the at-home “community spouse” asset and income allowances be no lower than the amount specified in a court order of support against the Medicaid spouse. You will need an Elder Law Medicaid Attorney – Medicaid Lawyer (whatever title you prefer!) to file the papers in court and convince the judge that you need ALL the retirement resources you and your spouse have since American retirees do not have enough savings! However, be advised some judges are not in favor of couples saving their money for future needs.
Half a Loaf Gifting?
I am not a big fan of this one since it involves paying the nursing home for a set period of time. It’s called half a loaf based on the easy to grasp idea that a single applicant give away half of his/her savings and with the other half pay the nursing home. But to be fair, here is a link to a proponent of such a plan. As you can see it involves staying in, not leaving, the nursing home. “Hey, if the shoe fits. Wear it!”
Sole Benefit Transfer to Spouse
This can be one of The Best strategies for married couples. It works the best when “assets” are transferred “to another for the sole benefit of the spouse.” The strategy calls for the transfer to an “irrevocable trust for the sole of the spouse.” It is set up for annual payments, like an IRA annuity, and can only make payment for the benefit of the community spouse. See my article written for and published by the National Academy for Elder Law Attorneys here.
Personal Care Contract
Family members may be paid for helping parents with long term care needs. See our article here