Medicaid is a lifeline for millions of Americans who need help with medical costs. But getting approved isn’t always simple. Many people don’t realize that certain financial moves can make them ineligible for Medicaid, even if they meet other requirements. If you’re planning for long-term care or just want to protect your health coverage, it’s important to know what can trip you up. One wrong step can mean losing access to vital benefits. Here’s what you need to watch out for if you want to avoid being disqualified from Medicaid.
1. Giving Away Assets
Transferring money or property to family or friends might seem like a smart way to qualify for Medicaid. But Medicaid has strict rules about this. If you give away assets within five years before applying, Medicaid will likely penalize you. This is called the “look-back period.” During this time, any gifts or transfers for less than fair market value can result in a period of ineligibility. The government wants to prevent people from hiding money just to get benefits. If you’re thinking about giving away assets, talk to a professional first. The penalties can be severe, and you could end up without coverage when you need it most.
2. Hiding Income or Resources
Some people try to hide income or resources to meet Medicaid’s strict limits. This can include not reporting a bank account, failing to mention a pension, or even stashing cash. Medicaid checks your finances carefully. If they find out you’ve hidden something, you could be denied coverage or even face legal trouble. Honesty is the best policy. If you’re not sure what counts as income or a resource, ask for help. It’s better to be upfront than to risk losing Medicaid altogether.
3. Buying Expensive Items
Buying a new car, jewelry, or other high-value items right before applying for Medicaid can be a problem. Medicaid may see this as an attempt to spend down assets to qualify. While you are allowed to spend money on certain things, like home repairs or paying off debt, luxury purchases can raise red flags. Medicaid might count the value of these items as part of your assets, which could push you over the limit. If you need to spend down assets, do it in ways that are allowed, like paying off medical bills or making your home safer.
4. Setting Up Irrevocable Trusts Incorrectly
Trusts can be a useful tool for Medicaid planning, but they’re tricky. If you set up an irrevocable trust and still have access to the money or property in it, Medicaid may count those assets as yours. This can disqualify you from benefits. The rules around trusts are complex and vary by state. A mistake here can be costly. If you’re considering a trust, work with an attorney who understands Medicaid rules. The wrong kind of trust can do more harm than good.
5. Failing to Report Changes
Life changes. Maybe you get a new job, inherit money, or your living situation changes. If you don’t report these changes to Medicaid, you could lose your benefits. Medicaid requires you to update them about any changes in income, assets, or household size. Failing to do so can result in disqualification or even having to pay back benefits you weren’t entitled to. Set reminders to check in with Medicaid if anything in your life changes. It’s better to keep them in the loop than to risk losing coverage.
6. Not Spending Down Assets Properly
If you have too many assets, you might need to “spend down” to qualify for Medicaid. But how you do this matters. Spending money on non-allowable expenses, like gifts or luxury items, can get you in trouble. Medicaid allows you to spend down on things like medical bills, home improvements, or paying off debt. But if you don’t follow the rules, you could be disqualified. Make a plan and stick to allowable expenses. If you’re unsure, get advice before you spend.
7. Ignoring State-Specific Rules
Medicaid is a federal program, but each state runs its own version with different rules. What works in one state might not work in another. Some states have stricter asset limits or different rules about what counts as income. If you move or are planning for Medicaid in a different state, check the local rules. Ignoring these differences can lead to disqualification. Don’t assume the rules are the same everywhere.
Protecting Your Medicaid Eligibility
Medicaid eligibility is complicated, and one mistake can cost you coverage. The best way to protect yourself is to stay informed and avoid risky financial moves. Don’t try to game the system or hide assets. Instead, focus on making smart, legal choices that keep you within the rules. If you’re unsure about a step, ask for help from a professional who knows Medicaid. Planning ahead can save you a lot of stress and keep your health care secure.
Have you or someone you know faced challenges with Medicaid eligibility? Share your story or tips in the comments below.
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