The Cost of Long Term Care
The impact that long term care costs can have on you and your family should not be ignored. Here are the facts:
- The average monthly cost of a nursing care facility in Michigan is $6,362.00
- Roughly 1 out of 4 Americans ages 55-79 is severely disabled
- Forty percent of persons 65 or older will spend some time in a nursing home
- Many seniors do not have or are unable to qualify for long term care insurance
- Long term care policies may only provide partial coverage and/or coverage for a limited number of years
Not surprisingly one the biggest fears of the elderly is that they or their spouse will have to enter a nursing home and their entire life savings will be consumed as a result. However, with proper estate planning this unfortunate result can be avoided.
Our firm encourages our clients to consider long term care coverage and can assist them acquire such coverage.1 In addition, with our Elder Transitions Plan™, we advise our clients on how to stave off the need to enter a nursing home, except as a last resort, receive the care they need, and assist them find programs that can help pay for such care. However, for those where it is no longer possible to take such actions, we assist them with becoming qualified for Medicaid nursing home benefits to avoid losing everything.
Medicare vs. Medicaid
Just because you may be entitled to Medicare benefits does not mean you are entitled to Medicaid benefits. The Medicare program pays for hospital and physician costs for seniors and the disabled. The Medicaid program covers long term care costs, subject to certain income and asset restrictions.
The average cost of a nursing care facility in Michigan is $6,362/month.
The Unpleasant Truth
To be eligible for nursing home Medicaid benefits a person or married couple may only own certain assets, subject to certain limitations, including the following assets:
- a homestead
- personal property and furnishings
- a motor vehicle
- a pre-paid funeral contract
Most other assets are considered "countable", including non-homestead real estate, IRAs and other retirement accounts, bank accounts, etc. Without proper planning, those "countable" assets must be "spent down" to pay for long term care before qualifying for Medicaid.
The need to "spend down" cannot be avoided simply by giving assets away to a spouse or loved one. Indeed, making gifts to non-spouses can actually cause Medicaid disqualification. The length of disqualification depends upon the value of the gift and when it was made. Medicaid rules have recently changed, creating two sets of rules for calculating the disqualification period, depending upon whether the gifts were made before or after February 8, 2006.
The Good News
There are ways, however, to qualify for Medicaid nursing home coverage, without having to first "spend down" all of your assets. These include, but are not limited to, the following:
- an asset conversion plan
- a "controlled" gifting plan, which our firm calls its Gift Plus Planning™ program;
- use of "actuarially sound", OBRA and DRA compliant annuities
- use of specialized trusts, such as Medicaid Exception A or B trusts, Solely for the Benefit trusts, and other trusts
- Maximizing "spousal" asset and income allowances, including the "Community Spouse Resource Allowance" (up to $109,600) with use of a living trust
Proper Planning Required
To take advantage of these "spend down" avoidance methods, a proper estate plan must be in place before a person becomes incapacitated. At a minimum, the estate plan should include a Will, a "Financial" Power of Attorney, with essential "Medicaid Planning" powers, and a Medical Power of Attorney. For a married couple, the plan should usually include a Living Trust.
Without a proper estate plan, preserving your assets from "spend down" is much more difficult, and sometimes impossible. If you already have an Estate Plan, you should have it reviewed to make sure it addresses Medicaid and long term care issues, and takes advantage of any changes in the law.
Once approved for Medicaid, proper estate planning is necessary to prevent your assets from passing through probate in order to prevent a claim against your probate estate by the state to recoup the cost of the Medicaid benefits paid on behalf of the individual or, perhaps, their spouse. This requires a coordinated plan, which may include the use of certain types of trusts, certain jointly titled assets, special real estate deeds, beneficiary designations, etc.
Frequently Asked Questions
Q: Does Medicare cover the costs of long-term care?
A: Medicare covers certain "skilled" nursing services and in-home care costs for a limited period of time and only under certain conditions. After that, Medicare does not provide coverage for long term care costs.
Q: Do I have to spend my life savings before I can qualify for Medicaid?
A: No. With proper planning a majority, if not all, of your assets can be protected from Medicaid "spend down."
Q: Is it too late to protect my assets from Medicaid "spend down" once I become incapacitated or have applied for Medicaid?
A: Maybe. The options available to you will depend upon your situation. An attorney experienced in Medicaid planning can explain your remaining options, if any.
Q: Will the State tell me how I can protect my assets and still qualify for Medicaid?
A: No. While the State agencies are helpful, they will not explain how to protect your assets from"spend down."
1 Services offered by Sterling Asset Protection Group, LLC