I became the financial POA for both my parents 3-1/2 years ago. My mother passed away just over 3 years ago and my father has Alzheimers. I have been able to self pay for dad's AL and now SNF facilities for the last 2 years, but we are approaching the end of his money. I sold his home and his assets are now quite limited. What happens if I cannot find out what their previous expenses were and cannot account for them? How can there be penalties for things I have no answers for? What happens if there are penalties and I am out of money?

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The answer will to some degree depend on the state in which you live.
In Florida, for instance, even though applicants are asked on the application about transactions over the past five years (in a rather general way), they are required to only produce three months of actual bank statements. New York, however, requires applicants to actually walk in with five years of financial records.

In any event, every state has hardship provisions. It is the rare case where respective agencies are trying to be punitive; they are simply looking for outright fraud. If your intentions have been appropriate (which it appears they are), and you have done the best you can given the circumstances, you should be fine.

Btw, I think it is a mistake to wait until all funds have been spent down before applying. Dad will still need cash available for his support when on Medicaid and you should look into preserving whatever he has left for his benefit.
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The state is fishing around for evidence of gifts (typically to family members). If his money was spent on HIM, then the state will not penalize such expenditures. Hopefully you can still obtain copies of bank statements going back at least a year. You won't be denied Medicaid if the records were out of your control and cannot now be located. Your statement under oath will suffice.
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First when we were getting ready to apply our elder attorney said we should be applying at least 6 mos before we thought we would hit the minimum amount that Medicaid required before as it can take at least that long to get through the process.

With the exception of cash out of pocket spending there should be some type of paper trail. Start with the bank and get the 5yrs of bank statements, Then on to any private pensions that may be in place, SS next (they take forever) but you need to get their documents too. If they had any investments call them too and get those documents. That should cover income.

Next expenses. Basically lots of phone calls - first the mortgage company, then all the utility companies (gas, electric, water, trash pickup, etc.), Then Medicare and any private insurance to get records (their documents usually have what was paid for by them and what was the co-pay or part your parents were required to pay). then on to expenses of house insurance, car insurance, any services they may have hired like lawn care, in home care etc.

You may find a lot of that info with their tax returns. There is a lot of time that is needed to get this together but its more time consuming than it is hard.

My FIL passed away this past Feb and we were just getting ready to start the process in March.

You will want to set things up to preserve as much funds as you can. A good Elder attorney and estate accountant can help you make sure you follow the laws in your state for that. We started to do that several years ago when we saw the onset of these issues in both my in-laws and now that they FIL has passed and MIL is incompetent with dementia and psychosis it is so much easier - Money WELL Spent. Might be something you would want to spend some of his money on to get things right.
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In reading so many posts here about Medicaid and look back periods I've decided that I had a very unique situation with Medicaid. I don't know if it's the norm or if we just got lucky or if people make Medicaid look back out to be this scary thing when really it isn't. But here is my experience with Medicaid:

My mom died and my dad sold the house. He made decent money on it and then was scammed out of his money. All he had left was his social security and a tiny annuity. Within several years of this happening he had to go into a NH. Medicare paid up to a point and I was advised to apply for Medicaid on my dad's behalf. I was given a booklet by the NH which went through the application process and I immediately began to stress over that money my dad was scammed out of. How do I explain that? What if he's denied? Etc, etc.

According to the Medicaid booklet I was given at the NH I was only able to gather 2 documents: my dad's honorable discharge papers from the Air Force and his social security card. Those were the only "official" documents I had. So I went to the Medicaid office.

My caseworker told me that it was ok that I didn't have the other documentation (like a birth certificate and other odds and ends documents) but I did need to get a copy of my dad's pension paperwork. I didn't point out to the caseworker that my dad had all of this money at one time and then lost it to a golddigger. I didn't point out anything, I just sat there sweet as can be and tried to ingratiate myself to the caseworker.

My retired from Boeing and it was a little messy trying to get the paperwork that we needed from them but eventually I got it. I faxed it to the caseworker. And then we waited.

I would call the caseworker every week to see how the process was coming along, sometimes I'd get an automated maze and I'd just hang up. I kept waiting for someone to ask me where the money from the sale of my dad's house was. No one ever asked.

While all of this was going on I had to keep the NH up to date on where we were in the Medicaid process. I'd give them updates and then we'd wait some more.

Six months after I first applied for Medicaid my dad was accepted. He had died by then and all we could do was laugh at how stupid the government was. But Medicaid NEVER asked me for any kind of information regarding the sale of my dad's home. NEVER asked about where all that money went to. I was ready to throw myself onto the mercy of my caseworker if she asked about it but it just never came up. Nothing did. For me it was an easy process. I had that one document to provide, about my dad's pension, and that was it. Other than that we weren't required to provide proof of anything.

I don't know why the Medicaid process was so simple for us, from what I've read and heard it can be very complicated and messy but that wasn't my experience.

Take this tale for what it's worth.
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I have had to deal with medicaid once for my aunt in Missouri. Due to not being able to account for the funds from the sale of her home I turned to an elder care lawyer. It cost me $1750.00 but saved me the stress of doing it all my self, and although the was a penalty of some months she was able to get medicaid to cover her NH costs.
Now I am having to go thru it again for my husband, my lawyer told me I could do it myself as ours was a simper case, it is worth it to me to use him again just for the stress relief.
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I live in Maine. Maine does require a yearly medicaid update. This was the first anniversary for Mom and it was much easier this time. All I needed to provide was her previous month's bank statement, a copy of her funeral trust acct, and her pension statements. In Maine, Mom can have just under $10,000 in the bank, a lot more than most states, I believe.
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You go to the bank and get five years of records. You look at the last five tax returns. The most common problem is money that is gifted away to children and other relatives. Go to the top of the page, click on Money and Legal and click on Medicare and Medicaid.
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I have bank records, it still does not explain some expenses. My parents had a reverse mortgage and I have never been able to find out where some of the money went. Mom did not tell and dad cannot. The only reason I have been able to keep my dad in a nursing home was by borrowing the remaining funds available in the reverse mortgage and then selling the home in a short sale. There was never any money gifted. They had not filed tax returns in years because they lived only on their social security and did not earn enough. I have fought for every dollar my dad has right now between borrowing and a VA Aid and Assistance supplement. I have heard too many horror stories, so just wondered what others have done when there just is nothing left and no answers.
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Gabi - Medicaid is administered or managed by each state under federal guidelines, so there is no 1 answer in how the whole mice-maze application & documents needed is done. Sometimes even within the same state. What I think both the NH and the state are looking for is a "pattern of spending" that makes sense for them to now be "impoverished". By & large Medicaid income limit is 2K & nonexempt asset limit is 2K and that means you are poverty level. Now the NH staff & the caseworker are local so they have a good idea of the demographics in your area and where those who are more wealthy live. I think detailed reviews on Medicaid are very much driven by if you seem to be affluent. So for my mom's area if you live in the 78209 you are very different than those in 78201 zip code.

My direct experience is with TX (for my mom & MIL) & LA (for MIL before moving to TX after Katrina). LA was like FL in that paperwork list from Medicaid was short & sweet, basically last 6 months of banking & documents to verify MIL "income" (annual statement from SS). She owned no home or car. MIL bank statement was about 4K & the Medicaid state employee told hubs (in person meeting @ MIL's NH) to spend her down asap so that the next banking statement would show under 2K and then apply and gave hubs the application back (so it wasn't entered in the system). He suggested a hearing aid or walker for spend-down. MIL was in a NH "Medicaid Pending" at the time, so we made sure she was fully OK with her co-pay (the Medicaid SOC/share of cost) & then spent about $ 1800 on hearing aid & walker paid by check on MIL account. Application then got submitted and she got approved maybe 90 days later. Now this NH really wanted residents so they were totally OK on waiting for state payment - I do think that makes a huge difference in your Medicaid experience. The state Medicaid guy wanted to get MIL approved and wanted to make it work as easy as possible for what he would have to review under Louisiana Medicaid.

But for TX, for my mom the NH gave me a 1 page bulleted list of the documents they (the NH) would review to determine if she would be accepted Medicaid Pending and then in turn the NH would submit the documents along with Medicaid application which I filled out. It was over 100 pages of documents BUT about 1/3 were mom's insurance policy & prepaid funeral policy. The bank statements were for 6 months & ALSO required was a statement on bank letterhead as to the disposition of all accounts closed or sums transferred for 3 years prior. So a total review of 3 years & 6 months of banking. Now fortunately for mom, as CD's or Tbills expired, they were not renewed but closed out and deposited in full into her checking account. Mom was in private pay IL & still had a home - so there was a pattern of spending that made sense for where her $ went to.

Now for MIL (when she moved from LA to TX), her NH gave BIL a 2 page list of documents they wanted to see. That MIL had already been on Medicaid in LA, made no difference either (as each state runs their Medicaid). MIL died before the application was approved and SIL dogged it through & was approved retroactively w/NH payments a year after MIL died. My experience is that TX application process is very much paperwork heavy. I imagine there is a big decline & appeal rate too. A lot of folks just don't have the time or OCD personality to find the oodles of paperwork for application or penalty or compliance later on, so family ends up either private paying for their parents or the elder moves in with family.

You know Gabi, if the proceeds from the house sale were deposited into Dad's account and he has been steadily paying for his care from this money, you should not have any issues with Medicaid. His "pattern of spending" to pay for his AL & SNF will show where the money went easily.
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Some states do an annual Medicaid renewal. If your state does this, you need to file their banking, SS & retirement, current value on insurance, etc so that you can find it asap to do the renewal.

For my mom, renewal is every spring and the letter sent to me is always either delivered a day or 2 before it's due date or a couple of days after it's due. Fun!! Letter reads that all documents are due 13 days from the date on the letter.

This years recertification was 25 pages:
-Form 0003 Authorization fo Furnish Information (all access pass) - 1 page
-Form H1200 Medical Assistance Recertification (due in 12 days) - 5 pages. In this one you have to detail bank account balance, NH trust fund balance, funeral contract value, homestead tax appraisal, any income in last year, etc. 4 sentence paragraph on MERP on Form H1200.
-Form H1245 Statement to Return Home (if they still have a home)
-Form 8001 MERP Receipt Acknowledgement
Plus: a copy of their current drivers license or DPS ID card; SS & all other retirements awards letter; bank statements for current month and past 3 months;
statement of current value of life, burial & health insurance; current tax assessor statement if they own a home and details on it's status (rented, empty, for sale or sold); Legal representative paperwork (DPOA, G/C) and their ID. The fact that some of these things were submitted in the initial application or previous renewals, doesn't matter, have to be submitted again. This years stack was 25 pages.

Also on the list is any trust agreements, annuity contract, stock certificate or bond instruments if they have those too. All of this for the Medicaid person & if they have a spouse, then all for the spouse too.

I would love to know if other states do renewal or re-certifications & if so what is required? I just cannot imagine the hurdle this presents for an elderly spouse or older family members to do this within the time frame supposedly required.
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