Mom was admitted to a nursing home from the hospital for rehab. Complications ensued. She has a blocked femoral artery which is resulting in her leg slowly dying. Gangrene has set in up to the knee so far. I have recently applied for Medicaid but haven't heard back as yet. I know that Mom hasn't long to live. If I collect the cash value of her life insurance policies and turn it over will they return any "unused" monies to the family? I don't mean to sound trite or uncaring. Mom is more important then any dollar amount! I'm just curious....

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mallory - yes your right that you get more $ out of the policy if you get paid the full amount as the beneficiary. Hopefully you die without ever needing to pay for NH and family gets the $ as the beneficiary. But if you need NH & Medicaid to pay, Medicaid doesn't care about future payouts, they need you to be impoverished.

For Medicaid, the issue with life insurance policies that have a cash value - like whole life & some GUL types - is that the cash value is a real $ amount asset that is going to have the applicant over the strict 2K asset eligibility; & has to be spent down before Medicaid will pay. Till all assets spent down, no Medicaid.

Once they die, the insurance pays the beneficiary, so unless that is the deceased estate then there is no way for state to recoup payment from Nephew Ned or Sister Sally. That's why cashing in and spending down gets enforced. Medicaid rules are very exacting and the caseworker has very little leeway…either it's there and cashed in or your ineligible.

The Medicaid review can be very detailed - for my mom, her policy was totally paid up and super old and produced a small annual dividend. It was enough that for the month paid, it would take her over the $ 2,064.00 monthly income allowed in her state. I had to come up with a notarized letter and a statement from her insurer, that the dividend was based on annual return - so it could be amortized and so not take her over the 2,064 as it could be divided by 12, in order for mom to qualify for Medicaid. The dividend shows up for taxes, so this as an asset will eventually show up for Medicaid. Now you would think, small dividend won't matter…..well it all matters for Medicaid compliance. And every year submit all this for her renewal application for Medicaid.

Some states also look at face value of the policy. If it's high, you may have to sell it on the secondary market at reduced value before Medicaid will pay. Some states have this keyed to 100K face value which is often the minimum policy that employers do for key workers. But if family cannot private pay for NH, and need Medicaid to pay, they really have little option but to cash in and spend-down.

The only way around this for Medicaid is that you plan in advance and have it so the elder does NOT own the policy (so not their asset) and if their married, neither of them are the beneficiary so they stay poor. It's not pretty no matter how you look at it.
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Totally agree, somebody has to pay, and the senior's assets ALL need to.go towards their bills. However I am under the impression (perhaps erroneous) that you get Much More Money out of Life Insurance if you WAIT until the person actually dies, as opposed to robbing the cash value early. I would hope Medicaid intake person realizes this. But the original post does not say how much the policy is worth upon death vs. Cash value. Another question is whether there burial costs are already pre-paid.....that Life Insurance could be converted towards those inevitable costs.
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Mallory - the problem is that DeeDee mom's has applied for Medicaid; the life insurance policy that mom's owns has a cash value that is an asset to be spent-down first & foremost before Medicaid will pay.

Medicaid is an at-need entitlement in which you have to be at-need impoverished. Most states have this at 2K in assets & about 2K in income for NH Medicaid.

In my experience, NH isn't just going to just "bill"; NH is going to want a binding contract signed off by the resident &/or their family to pay the 5K - 12K a mo. for room & board in place for when Medicare covered rehab payment stops OR know that the resident is Medicaid ineligible (which they do as there is a cash value policy). If family wants to private pay the thousands of $$ each mo. & leave mom's the life insurance policies untouched - that's fine. But somebody must pay.

If you don't pay, the NH will do a "30 Day Letter" to family - happens all the time. I've seen it done at both NH & the IL that my mom has been at; one escalated really ugly with police called. If you don't come to an agreement with the facility pretty quick, the resident will be made an emergency ward of the state and a court appointed or state approved guardian is placed. My state (TX) has a existing list of vetted individuals who do this and can act within a couple of hours of judge signing off on ward request. That life insurance policy along with anything else of value is now out of family hands and under state control. Facilities kinda have to be ruthless on "billing" as the costs are just huge and profit margins slim.
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Tried to read that post, confusing. :)
You need to talk to the Social Service people at the hospital or the facility she is staying at if she is in one. My mom was just in rehab. After Medicare and supplimental she owed $151.00 a day. I was told up front by the billing department what would be paid. I was under the impression that insurance policies were the beneficiaries to spend as they wish. My Aunt was on medicaid and owned her home. Medicaid put a lein on the house that was to be repaid when the house waas sold. You really need to talk to someone who can sit with you and explain. Remember, children are not responsible or parents debts.
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If I were you I wouldn't be doing anything at all with those life insurance policies. Let them stay until she passes--they'll be worth more then! Wait awhile for all the bills to come in, from all creditors.
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DeeDee - You kinda have the cart before the horse ? as regarding Medicaid.

Now mom is in rehab from a hospitalization stay, correct? If so, mom is being covered in her stay (both for room & board & medical expenses) at the rehab by Medicare. Medicare pays100% for at least 21 days and can pay up to 80% for up to 100 days if mom is progressing in her rehab. During rehab often the NH will encourage the family to apply to Medicaid as they can tell that the resident will not be returning home and so the Medicaid application is in the pipeline so that facility will have hopefully payment from Medicaid once Medicare stops. Very very often folks get Medicare & Medicaid confused - this site has really excellent articles that go into details the difference & there also is a pretty fabulous book by one of the experts on this site - Heiser's Medicaid Secrets book - that is a great reference on just how Medicaid & Medicare are set up.

You really need to speak clearly with the NH as to where mom is on Medicare paying for her stay - if she is past the 100% coverage by Medicare, then the NH has to be paid the 20% in some way. Like for my mom, any 20% would have been covered by her secondary insurance (Blue Cross) for as long as Medicare was paying. If your mom does not have a secondary policy, then mom or family will need to pay the 20%. You need to find out IF Medicare is still paying for mom's stay. If not, then mom is likely "Medicaid Pending" - her application is in the Medicaid system. If you know there is a cash value policy, then really mom needs to be private paying @ the NH as she is going to be declined by Medicaid as she has assets. NH needs to be ensured to be paid one way or another.

Based on what you wrote, your mom has a life insurance policy with a cash value, right? If so, until the cash value is "spent-down", mom will not qualify for Medicaid. Medicaid requires that they be impoverished - usually with 2K in assets and about 2K in monthly income for an individual NH Medicaid resident. They also need to qualify for needing skilled nursing care - which your mom certainly does.

Family has to do the spend-down; you don't "turn it over". Medicaid does not "take" their money; Medicaid doesn't get paid the cash value of the insurance policy. You do not have to turn over the $ to the NH either - although often a NH will press upon family to do this and give you a "but it will be just so much easier for you" attitude on it, but the $ is mom's and either she or whomever is her DPOA should determine how best to spend down the limited resources. Realize that Medicaid cannot make mom eligible for Medicaid to pay for the NH or anything else covered by Medicaid (medications, PT, OT, etc) till her funds are spent down to whatever is the maximum allowed by your state for them to keep. And Medicaid can require you to provide verification as to how the spend-down was done.

So say mom's cash value is 50K. You go through whatever hoops with the insurance company to get the policy cancelled and get the 50K cash value; $ is deposited in mom's bank account. Since mom has 50K in assets, she will not qualify for Medicaid until she has spent down 48K in assets (as basically they are allowed to keep 2K in assets for Medicaid).

You or whomever is mom's DPOA now has decisions to be made on 48K:
- private pay for the NH. Avg cost is 8K a mo. so 6 mos of NH. All the $ gets paid to NH - perhaps to cover the 20% shortfall from Medicare or private pay for her stay till she becomes impoverished or passes away. If mom dies before all the funds are spent, then the balance is an asset of her estate. If mom has her bank account (where the $ is) as a POD to you, then the $ in it is yours outside of probate. Since mom is not yet on Medicaid, they have no claim or lien on it.
- do a prepaid NCV (no cash value) funeral & burial policy for mom that is Medicaid compliant. If mom does NOT have this done, I'd really really encourage you to do this asap. This could cost 8K - 10K. Some states have limits on funeral & burial costs to be Medicaid compliant. The FH will know what's what on this. Fh do these all the time. You want an extra copy or two of contract to provide to Medicaid so ask the FH for these as it will save you time & $ at a copy place.
- buying personal needs items to have mom's stay in the NH be better. Like for my mom, she bought extra eyeglasses, new hearing aids, new easier to put on & take the super hot NH laundry, all sorts of dental care (about 37K) - now if your mom is close to death, you don't have those options. But if she could get a upper thigh amputation and live another year or two, then buying her a specialized wheelchair could be a good spend-down for her.

None of this is at all easy. It's a lot to understand to begin with - then added on the chaos factor in mom's rapid decline, you get overwhelmed. Clearly speak to and take notes at the NH and with mom's MD's as to what the near future is likely to be.

Also If you are DPOA for mom, always always sign everything as "Jane Smith Jones in her capacity as DPOA for Mary Smith".

Good luck in all this and let us know how things turn out.
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