Medicaid Crisis Planning

Serving Clients in Houston and the Surrounding Area

Sudden Changes and Big Decisions

Life can change in an instant. A fall, a stroke, a diagnosis — suddenly, someone you love needs round-the-clock care, and your family is faced with decisions you never anticipated. In these moments of crisis, the emotional weight is compounded by the financial reality of long-term care. The costs are staggering, the rules are complex, and the stakes could not be higher.

At The Stegall Law Firm, we help families in Houston and the surrounding area navigate these sudden changes with clarity and confidence. Medicaid crisis planning is the process of taking immediate, legally sound steps to qualify a loved one for Medicaid benefits — even when the need for care has already arisen.

Long-Term Care: Counting the Cost

The financial burden of long-term care is one of the most significant challenges families face. According to the Genworth 2020 Cost of Care Survey, the national median cost for a semi-private room in a nursing home was $105,850 per year. These costs have been increasing at an average annual rate of approximately 3.57%, far outpacing general inflation.

At that rate of increase, a family that delays planning by even a few years may find that the cost of care has grown by tens of thousands of dollars. For a nursing home stay that lasts two, three, or even five years, the total cost can easily exceed half a million dollars.

Most families simply do not have the resources to pay for long-term care out of pocket for an extended period. This is why Medicaid planning — and in particular, Medicaid crisis planning — is so critically important.

Medicaid Overview

Medicaid is a joint federal and state program that provides health coverage, including long-term nursing home care, to individuals with limited income and resources. Unlike Medicare, which is available to most Americans over the age of 65 regardless of income, Medicaid is a means-tested program. This means that applicants must demonstrate that their income and assets fall below certain thresholds in order to qualify.

Each state administers its own Medicaid program within federal guidelines, which means the specific rules, income limits, and resource allowances vary from state to state. In Texas, the Medicaid program is overseen by the Texas Health and Human Services Commission.

Because Medicaid is designed as a safety-net program for those with limited means, applicants must meet strict financial eligibility requirements. Understanding these requirements — and the strategies available to meet them — is essential.

The Medicaid Maze

Navigating Medicaid eligibility is one of the most complex challenges in elder law. The rules are detailed, the terminology is specialized, and the consequences of mistakes can be severe. Here are some of the key financial figures and concepts you need to understand:

Resource Limits

Individual Resource Allowance: $2,000. The Medicaid applicant (the person who needs nursing home care) may retain no more than $2,000 in countable resources.¹ Countable resources include bank accounts, investments, and most other financial assets. Certain assets are exempt, including the applicant’s primary residence (subject to an equity limit), one vehicle, personal belongings, and prepaid burial arrangements.
Maximum Community Spouse Resource Allowance (CSRA): $130,380. When one spouse needs nursing home care and the other remains in the community, the community spouse is permitted to retain up to $130,380 in countable resources.¹ This allowance is designed to prevent the community spouse from being impoverished by the cost of the institutionalized spouse’s care.
Half of Combined Resources: $65,190. In many states, the community spouse is entitled to retain one-half of the couple’s combined countable resources, up to the maximum CSRA of $130,380. If one-half of the combined resources is less than the minimum, the community spouse may retain at least the minimum allowance.¹
Minimum Community Spouse Resource Allowance: $26,076. Regardless of how the couple’s resources are divided, the community spouse is entitled to retain at least $26,076.¹ This floor ensures a basic level of financial security for the spouse who remains at home.

The Transfer Penalty Rule

One of the most important — and most misunderstood — aspects of Medicaid eligibility is the transfer penalty rule. Medicaid imposes a look-back period (60 months in most states, including Texas) during which all financial transactions are scrutinized. If the applicant (or their spouse) transferred assets for less than fair market value during the look-back period, Medicaid will impose a penalty period — a span of time during which the applicant is ineligible for Medicaid benefits.

The length of the penalty period is calculated by dividing the total value of the improper transfers by the average monthly cost of nursing home care in the state. For example, if $100,000 was transferred and the average monthly cost of care is $7,000, the penalty period would be approximately 14.3 months.

During the penalty period, the applicant must find another way to pay for nursing home care. This is why well-intentioned but uninformed transfers — such as gifting assets to children in the years before applying for Medicaid — can have devastating consequences.

It is critical to understand that there are legal strategies for restructuring assets and making transfers that do not trigger a penalty. These strategies must be implemented carefully and in full compliance with Medicaid rules. This is where the guidance of an experienced elder law attorney is invaluable.

The Medicaid Qualification Process

Qualifying for Medicaid involves several steps:

Gather financial documentation. The applicant and their spouse must provide detailed records of all income, assets, and financial transactions for the look-back period (60 months). This includes bank statements, investment account statements, property records, insurance policies, and records of any gifts or transfers.
Assess eligibility. An elder law attorney can review the applicant’s financial situation and determine whether they currently meet Medicaid’s resource and income limits — or what steps need to be taken to reach eligibility.
Implement a Medicaid plan. Depending on the circumstances, this may involve spending down excess resources on exempt assets, establishing certain types of trusts, purchasing an annuity, or making other legally permissible transfers. In a crisis situation, these steps must be taken quickly and precisely.
Submit the Medicaid application. The application is submitted to the state Medicaid agency, along with all required documentation. The agency will review the application, verify the information provided, and make an eligibility determination.
Respond to requests for additional information. It is common for the Medicaid agency to request additional documentation or clarification during the review process. Prompt and thorough responses are essential to avoid delays or denials.
Appeal if necessary. If the application is denied, the applicant has the right to appeal. An experienced elder law attorney can represent the applicant in the appeals process and advocate for a favorable outcome.

Conclusion

The Medicaid qualification process is complex, and the consequences of errors can be severe — including lengthy penalty periods, denial of benefits, and the rapid depletion of a family’s savings. Whether you are planning ahead or facing a crisis, seeking the guidance of an experienced elder law attorney is one of the most important steps you can take.

At The Stegall Law Firm, we have the knowledge and experience to guide you through the Medicaid maze. We will help you understand your options, develop a plan that protects your family, and navigate the application process from start to finish.

These amounts are based on 2020/2021 federal figures and may vary by state. Amounts are updated annually. Contact our office for current figures applicable to Texas. ↩ ↩² ↩³ ↩⁴