Arizona Medicaid Planning 2025 (Eff. 1/1/2025)

Is ALTCS Planning Ethical?

Some believe that preserving assets for a loved one is not ethical. They contend that the preservation comes at a cost to the taxpayer and should not be allowed. They believe that Medicaid or ALTCS is only for the poor and should not be permitted.

By taking our services about Arizona Medicaid Planning , you would be able to qualify for ALTCS.

Ironically, however, many of those same individuals who say such services are only for the poor are quick to seek help to preserve their assets when they or a loved one needs long-term care. Long-term care can be ruinously expensive and leave a spouse penniless, making the nursing home or assisted living one’s heir. Consider the following two scenarios:

Scenario One:
Kim and her husband Bill both worked and saved for retirement. They paid their taxes and were pillars in the community. Kim developed a rare debilitating condition that left her unable to perform simple daily tasks and was unable to even get from the bed to a wheelchair without assistance. Bill was also frail due to his advanced age.

Kim and Bill had a little over $250,000 in savings. Their home in Arizona had appreciated  and worth more than $800,000. They were told that, because of their savings and home equity above the limit of $730,000, they did not qualify for ALTCS benefits.

Working with a Certified Medicaid Planner (CMP), they were able to qualify for the program with some simple re-allocation strategies that the CMP recommended. When Kim passed away four years later, Bill was able to stay in his home and still had over $220,000 in assets to live out the remainder of his life. Know about Income Only Trust Arizona.

Scenario Two:

John had lived with a fairly wealthy older woman until she passed away. She left him with a sizable amount of money in her will, over $1,000,000.

John was not very responsible with the money she left. Over time he managed to squander the money she left and was virtually penniless as he grew older.

He also did not take care of his health either.

Now poor and needing long-term care, John was able to have his care paid for by the taxpayer despite having acted irresponsibly with both his money and his health. Is John  more ethical than Kim and Bill?

Let’s further explore the question of whether ALTCS Planning (hereinafter simply Medicaid Planning) is ethical. First, what is Medicaid Planning? Since long-term care can be ruinously expensive, Medicaid Planning gives people the opportunity to protect assets, plan for the future, and prepare for the uncertainties of paying for long-term care.

Medicaid Planning makes it possible to plan for long-term care costs better, allowing individuals to make sound decisions for the unseen future. It can go beyond only crisis planning, helping with decisions to purchase a long-term care insurance plan or a combination of asset planning and a short-term care insurance plan.

The principles governing Medicaid Planning can be referred to as Medicaid ethics. When exploring the ethical question of whether Medicaid Planning Phoenix is ethical, we must consider the legal aspects of the Medicaid program and the planning that is allowed within the law.

ALTCS, is governed by the Centers for Medicare & Medicaid Services (CMS) and the Arizona Health Care Cost Containment System (AHCCCS). Since this system is born out of Arizona statutes, it is clearly legal to plan and protect assets while qualifying for Arizona Medicaid or ALTCS.

Medicaid Rules and Regulations are in place to protect the non-institutional or well spouse from being left destitute after caring for a spouse who needed long-term care. In 1988, Congress enacted the Spousal Impoverishment Act, which allows a spouse to keep up to the Maximum Spouse resource allowance. This figure for 2025 is $157,920.

Within the Medicaid Rules and Regulations, there is guidance on how to treat a gift or an uncompensated transfer of an asset. This guidance is called the Divestment Penalty Divisor, which refers to the average cost of a nursing home in a given county. Currently, in Maricopa County, Arizona, the Divestment Penalty Divisor is $8,201.16 (eff. Oct 2024). The amount of a gift is divided by the Divestment Penalty Divisor to determine the number of months and days of ineligibility that will be assessed before an applicant’s ALTCS coverage begins.

For example, suppose that in order to qualify, an individual must spend down $49,207. Suppose this individual has an income of $2,200 per month from Social Security and a small pension. For ALTCS approval, the CMP might recommend gifting the applicant’s adult child the full $49,207. This gift is then divided by the Penalty Divisor: $49,206.96 ÷ 8,201.16 = 6 months.

Next, suppose this individual’s cost for care in an assisted living community is $5,500 per month, resulting in a deficit of $3,300 per month after subtracting the $2,200 monthly income. For the next 6 months, the gift amount will be used to pay the negative cost of care: $3,300 X 6 = $19,800. Subtracting this amount from the original gift amount leaves a total of $29,406.96 preserved for other unexpected expenses or a legacy to the individual’s loved ones.

If it were illegal to do such planning, what would be the purpose of the Divestment Penalty Divisor? 

Many other strategies are provided in the Medicaid Rules and Regulations to allow individuals to preserve assets. Trained CMPs are also provided to help individuals and their loved ones preserve assets while still qualifying for ALTCS. If you are looking for Medicaid Planning Phoenix then call Steve Dabbs now!

There is also an annuity product designed to convert a countable asset to a non-countable income. This annuity is called a Medicaid Compliant Annuity, highlighting that it is compliant with Medicaid or ALTCS and with the relevant laws. No state has been successful in disallowing the use of the Medicaid Compliant Annuity in federal court. Thus, federal law allows individuals to preserve assets with this Medicaid-friendly annuity product.

Thus, in the final analysis, Medicaid Planning is like tax planning, which is also legal.

So is Medicaid or ALTCS Planning Ethical?

We already mentioned irresponsible John vs. Kim and Bill, the responsible couple.

Now, let’s see how Medicaid planning applies the pillars of ethical planning. This will help us to determine if this type of planning is ethical.

• The Beneficence pillar in ALTCS refers to the ability to “do good” for the applicant. It seems reasonable to argue that keeping a spouse from being left destitute is a the benevolent thing to do.
• The Nonmaleficence pillar refers to “doing no harm.” I would argue that not helping someone to preserve assets is maleficent and, therefore unethical. Thus, it follows logically that it is ethical to help someone with Medicaid Planning or ALTCS Planning.

• The Freedom of Consent and Autonomy pillar refers to the freedom of choice when deciding what care one needs or wants. Thus, giving a person who needs care choices is ethical.

• The Justice pillar refers to fairness, equality, and equitable treatment. Medicaid planning is just because it is fairly and equally applied to all.

Based on these key pillars of Medicaid ethics, it seems clear that ALTCS planning is ethical. This means it is the right thing to do for yourself and your loved ones.

It was Honorable Lawrence Bracken of the New York Supreme Court who stated: “No agency of the government has any right to complain about the fact that middle-class people confronted with desperate circumstances choose voluntarily to inflict poverty upon themselves when it is the government itself which has established a rule that poverty is a prerequisite to the receipt of government assistance in the defraying of the costs of ruinously expensive, but absolutely essential, medical treatment.”

On the other hand, it is reasonable to argue that it is not ethical to withhold information that could benefit someone or to purposely give false information.

For example, suppose a group homeowner tells their residents that they do not qualify for Medicaid or ALTCS because if they go onto Medicaid or ALTCS, they lose money. Or suppose an assisted living manager purposely withholds information from a resident that could qualify for Medicaid or ALTCS or provides misinformation to them. These actions are not illegal, but they are certainly not ethical.

Ultimately, you have to be the one to decide if Medicaid Planning is the right thing to do for yourself or a loved one. Since Medicaid Planning can be a complex process, it is important that you consult a Certified Medicaid Planner or elder law attorney when you are applying various Medicaid Planning strategies.

Contact Steve Dabbs CMP™, Certified Medicaid Planner™ now for Long Term Care Planning Phoenix at 480-967-8477