Understanding nursing home payments
Before diving into the specifics of a money market account, it's essential to understand the two primary methods of paying for nursing home care: private pay and Medicaid. The path you choose significantly impacts how your assets, including your money market account, are handled.
Private pay
During the private-pay period, you are personally responsible for the full cost of care. Your money market account is just like any other bank account—it is your resource, and you must use it, along with other assets and income, to cover the bills. There is no legal mechanism for a nursing home to simply take the account, but they will require payment for services rendered, and they will expect those payments to come from your financial resources. Failing to pay would lead to collection attempts and potential legal action, similar to any other unpaid debt.
The role of Medicaid
If your savings are depleted, you may need to apply for Medicaid, a federal and state program for those with limited income and resources. Unlike private pay, Medicaid has strict financial eligibility requirements. For an individual to qualify for long-term care Medicaid, countable assets are typically capped at a very low limit, often around $2,000. Your money market account is a countable asset, and its value must be spent down to meet this limit before Medicaid benefits begin.
The interplay of money market accounts and Medicaid
Your money market account is generally considered a liquid, countable asset by Medicaid. This means that its balance will be included in the calculation of your total assets to determine eligibility. Here's a breakdown of the key factors at play:
- Countable Asset Status: For Medicaid purposes, a money market account is not an exempt asset like a primary residence (within certain limits) or a personal vehicle. You will be required to “spend down” your money market funds and other countable assets on your care until you meet the state's asset limit.
- The Look-Back Period: To prevent people from giving away their assets to qualify for Medicaid, a 60-month (five-year) “look-back period” exists. Medicaid officials will review all financial transactions, including any transfers or gifts from your money market account, for the five years prior to your application. If you gifted money from the account during this period, you could be penalized with a period of Medicaid ineligibility.
- Medicaid Estate Recovery Program (MERP): This federal program requires states to recover the costs of Medicaid payments from the estates of deceased beneficiaries. After your death, the state can make a claim against your estate to recoup the costs of your long-term care. While your money market account may be gone if you spent it down, if it was in a trust or had been transferred and later returned, it could be part of the estate recovered by the state.
What about joint money market accounts?
Joint accounts can create significant complications. When you apply for Medicaid, the state often presumes that all funds in a jointly-held account belong to the applicant. This can put the financial resources of the non-applicant spouse or another joint owner at risk. To rebut this presumption, the non-applicant owner must provide documentation proving their financial contributions to the account, a process that can be burdensome. For married couples, spousal impoverishment rules offer some protection for the “community spouse,” allowing them to keep a certain amount of assets, but the details are state-specific and complex.
Strategies to protect your money market account
Proper planning is the best way to protect your assets. Waiting until you need immediate care significantly limits your options. Strategies include:
- Long-Term Care Insurance: This insurance can cover nursing home costs for a set period, delaying or preventing the need to rely on Medicaid and spend down assets.
- Irrevocable Trusts: Placing assets, including money, into an irrevocable trust at least five years before needing care can shield them from Medicaid calculations. Once transferred, the assets are no longer considered yours.
- Medicaid-Compliant Annuities: For married couples, a Medicaid-compliant annuity can be used to convert countable assets into a regular income stream for the non-applicant spouse. This helps the well spouse financially while reducing the couple's countable assets.
- Strategic Spending Down: Using your money market account funds on allowable expenses, such as home modifications, debt payoff, or creating a funeral trust, can bring your assets below the Medicaid limit.
- Seek Legal Counsel: Consulting an experienced elder law attorney is vital to navigate these complex rules. They can help you understand your state's specific laws and create a compliant asset protection plan.
Paying for nursing home care: A comparison
| Feature | Private Pay | Medicaid |
|---|---|---|
| Eligibility | No financial eligibility requirements; based on ability to pay. | Strict financial eligibility limits for income and assets (e.g., ~$2,000). |
| Asset Impact | All assets, including money market accounts, are used to pay the bill until funds are exhausted. | Countable assets, including money market accounts, must be spent down to meet the low resource limit. |
| Cost Coverage | Covers the entire cost of care until funds run out. | Covers the difference between the resident’s income and the cost of care after eligibility. |
| Estate Recovery | No estate recovery by the state. | The state may recover costs from the deceased’s estate after their death. |
| Look-Back Period | Not applicable; no restrictions on gifting or asset transfers. | 60-month look-back period for asset transfers to prevent disqualification. |
Conclusion
While a nursing home cannot directly seize your money market account, it is a key financial asset that will be spent to pay for care. For those who can't afford private pay, the account's value is critical for determining Medicaid eligibility. Advance planning with an elder law attorney is the most effective way to protect your assets and ensure you receive the care you need without jeopardizing your financial legacy. The rules surrounding asset spend-down and Medicaid Estate Recovery are complex, but understanding them is the first step toward securing your future. For more information on Medicaid eligibility and estate recovery, visit the official Medicaid website at medicaid.gov.
