There can be no doubt but that the statutes and provisions in question, involving the financing of Medicare and Medicaid, are among the most completely impenetrable texts within human experience. Indeed, one approaches them at the level of specificity herein demanded with dread, for … they (are) dense reading of the most tortuous kind …
Rehabilitation Association of Virginia, Inc. v. Kozlowski, 42 F.3d 1444, 1450 (C.A. 4 1994)
Medicaid Planning is a complicated and sensitive subject. There is a hot ongoing debate in the legal community as to whether or not Medicaid Planning is ethical. The intense debate of recent years as to whether or not it is even 
legal appears to have calmed down somewhat after former Attorney General Janet Reno issued a letter refusing to enforce a provision passed into law by Congress which would have made it a federal crime for any attorney or other professional to give advice that would enable a recipient to qualify for Medicaid.
Debates aside, the stark reality is that only the very wealthy and the very poor can afford to live to an old age in America. If you live long enough, nursing home care will likely be required. The poor, who have no assets, qualify immediately for Medicaid and the wealthy can afford the forty thousand dollars a year or more it takes to privately fund nursing home care. For everyone else in the middle, either the family comes up with the money and if they can’t, the recipient's assets are taken to pay the nursing home bills up to the point that they are impoverished and qualify for Medicaid. The estate that a middle class family took a lifetime to acquire can disappear within months or at most a couple of years. Family farms that took generations to acquire can disappear in one illness.
There are estate planning strategies to minimize the effects of the long term health crisis for the elderly. The best is long term care insurance. Unfortunately, many cannot afford it. After that, the options become more draconian and sometimes have to be taken very far in advance.
Travis Smith, Assistant General Counsel for the Oklahoma Department of Human Services has written an excellent article about qualifying for Medicaid in Oklahoma. That article can be found here. Mr. Smith’s article is two years old however and the Bush Administration has enacted new requirements for Medicaid eligibility which in all likelihood the Oklahoma House will have to adopt within the next session or so. So, while Mr. Smith’s article gives an excellent overview of the process, specific details such as the look back periods for asset transfers may no longer be accurate.
Planning for Medicaid eligibility, legal and ethical considerations aside, is a reality that will have to be faced by many elderly Americans. The only question is how the elderly individual will face it, by planning or default.