When Elizabeth received the call from her brother telling her that he had just placed their mother, Gertrude, into a Kansas nursing home, she took the first available flight to Kansas City. Elizabeth was her mother’s durable power of attorney for financial decisions and knew there were a number of things she needed to do to make sure her mother’s financial affairs were in order.

Elizabeth knew quite a bit about Medicaid coverage for nursing home costs, as her aunt had entered a Kansas nursing home just a few months ago. Elizabeth remembered the exempt assets her aunt was able to keep, as well as those things her aunt purchased with her non-exempt assets, as part of her “spend down”in order to qualify for Medicaid.

Elizabeth knew that her mother would be able to purchase a funeral plan as part of her spend down. Her aunt had an irrevocable funeral plan she purchased when she lived in Florida, which included flying her to Florida to be buried next to her husband. The plan cost over $13,000. The entire plan was exempt. So, Elizabeth purchased a funeral plan for Gertrude in Kansas, in the amount of $11,000 (an amount much greater than she thought she would use, because the funeral home explained that they would refund to Elizabeth any unused funds).

Gertrude remained private pay until she spent down to $2,000 and then applied for Medicaid. However, Gertrude was denied Medicaid coverage due to excess resources. Elizabeth called our office, certain that the application was wrongfully denied. When we asked Elizabeth what assets her mother had, she said, “Nothing. My mother has a checking account with only $1,800, a funeral plan of $11,000, and a life insurance policy with a cash value of $800.” When we explained the state was correct in denying her mother for benefits, Elizabeth said her aunt had $1,900 in her checking account and a funeral plan worth $13,000 when she qualified for benefits only three months ago!

I told her there were two distinguishing circumstances: 1) her aunt had an out of state funeral policy that was irrevocable and 2) her aunt did not have a life insurance policy. I then went on to explain how Kansas Medicaid treats funeral plans and insurance policies.

With regard to the funeral plans, I explained to her that her aunt’s funeral plan was exempt because there is no limit on irrevocable funeral agreements from other states. Gertrude’s plan, however, is subject to certain restrictions because it was purchased in Kansas. One of the problems with the plan Elizabeth purchased for Gertrude was that it was not irrevocable. Secondly, although Kansas does not limit the merchandise (caskets, headstones, grave liners, etc.), there is a limit of $7,000 in services. We advised Elizabeth to adjust Gertrude’s funeral plan and limit the services accordingly and then make it irrevocable.I also informed Elizabeth that if the funeral home did have excess funds after rendering her mother’s funeral services, the excess would be claimed by Kansas Estate Recovery. So, there was no benefit to her buying excess services in hopes that she would shelter some of her mother’s resources.

Next, I explained to Elizabeth that in Kansas, although life insurance policies are exempt as long as the total face value of all the policies is less than $1,500, the exemption for life insurance policies cannot be used in addition to taking advantage of the exemption for an irrevocable funeral plan. (In other words, if a Medicaid applicant has an irrevocable funeral plan, any insurance policies he or she has are countable, regardless of the value).

Individuals entering the nursing home are often told to meet their “spend-down” for Medicaid by purchasing a funeral plan. That’s not always as easy as it sounds. When purchasing funeral plans it is important to know the state specific allowances for services and merchandise so that you or your loved one is not disqualified from receiving Medicaid.