Please help – Life insurance w/ medicade

My mom was approved in April for long term/institutional Medicaid (Bucks County PA) She had been in a rehab facility, and we knew she could not return to living with my sister, so the facility applied for long term Medicaid and was approved.

My mom has a fixed whole life insurance policy with my sister, and I designated as the beneficiaries but at that time we were applying for Medicaid, I told the girl from the facility who was submitting the application that I thought her outstanding loan balance was more than the cash value of the policy, so she did not worry about including her life insurance policy information.

Since then, I have learned that if we were to surrender it, we would get about $1600 but the idea of going from her death payout of $18,500 to $1600 makes me sick.

When I called the insurance policy to find out how to surrender it, she suggested transferring the ownership to my sister or I. She did not know if that would be an issue when Medicaid renews her application next year and from what I have gathered I think Medicaid would count that transfer as a gift and penalize her for it (which is not an option since we do not have the money to pay for her care)

I am trying to find a way to keep her policy active and not have to surrender it when we renew her Medicaid.

If that is impossible, I am also trying to figure out if it is worth my sister and I paying her monthly premium ($79/month) and the years interest on her outstanding loan (about $180.00) in an effort to increase the surrender value. This way when the facility reapplies for Medicaid there will be more than just $1500 for them to transfer into a burial trust that Medicaid will not count as an asset. I am not sure if we would end up putting more out than we would get back by doing that and am wondering if it would be better to surrender the policy now before losing any more cash value.

She is in PA and can only have $2400 in assets. She only has about $1000 in her bank account but that is all the money she has and she needs a lot of things the facility she is in doesn’t supply. Every week I am bringing her ginger ale (it’s all she drinks) and her snacks because she doesn’t really like the food they serve and also can’t eat a lot of foods because they bother her stomach. She also requires us to bring her over the counter meds (she is not supposed to have them, but she can’t get the facility to give her the amount of the medications that she “needs” so it’s up to me to bring her medicine she can keep in her purse and take as needed. She also refuses to use the facilities personal care items (shampoo/conditioner/body wash etc.) It’s not cheap so the $45 that she gets to keep a month barely covers those things and then there are the other things she needs. She is also legally blind so we are always picking up misc things that will think will help her in her day-to-day life.

✱ Policy Account Values as of 08/26/2024 per the website ✱

Policy Value: $5,096.81

Cash Value: $1,868.10

Policy Loan Values as of 10/01/2024

Outstanding Loan: $3,464.99

Maximum Loan Available: $1,534.3

Is there anyway we can keep her life insurance until she passes away without any wrong doing with Medicaid?