Sunday, April 1, 2012

Medicaid and Long Term Care

As people start aging and diseases are more likely to affect their lives it is important for them to start strategizing for the future.  It is a must to have a few pieces of paperwork prepared such as a Living Will, Health Care Proxy and Power of Attorney.

Once the forms have been covered eligibility for long-term care should be considered.  Medicare requires people to be 65 or older to start receiving coverage, if someone is disabled they can receive coverage earlier.  Medicare does not pay for long-term care it pays only for medically necessary skilled nursing facility.  When speaking of long-term care we refer to support services such as bathing, getting dressed and using the bathroom.  Medicare does not pay for custodial care which is non-skilled care, diabetes monitoring would fall under this as well.

Although long-term care can be needed by anyone at any age the majority of people that need it are 65 or older.  According to this year about 9 million people over the age of 65 will need it and by 2020 the number will reach 12 million.  Individuals that are 65 have a 40% chance of entering a nursing home according to a study by the U.S. Department of Health and Human Services.

Medicaid spending for long-term care has increased incredibly and it will soon overtake Medicare as the fourth largest federal budget item.  It is no surprise why it is difficult to qualify for it and why people often have to resort to elder law attorneys to evade financial ruin.

Medicaid eligibility varies from state to state. In NYC a single person can only have income of $812 a month and assets worth $14,250.  For a married couple the monthly income is set at $1,179 and assets at $20,850.  If you will receive long-term care at home then you will not have to worry about the 5 year look back it may be something like 3 months.

When speaking of institutional Medicaid which will cover nursing home care the 5 year look back kicks in.  The 60 month period starts when the person applies for Medicaid therefore every financial transfer conducted within that time period will be analyzed.  For example if you transferred $100,000 3 years ago and the average cost of receiving nursing home care is $10,000 per month the person will be penalized for 10 months ($100k /$10k = 10).  That means if that money was given to a family member and they spent it all you will not receive long-term care until you get $100,000 and pay for your first ten months only then will Medicaid start paying.

There are strategies for people to protect some of their wealth from easily being destroyed by the need of long-term care.  Preparation is a must, if the money has already been transferred before the 5 year period there is no need to worry.  Few people can accurately predict when they will develop a disease so they can resort to gifting, private annuities and protective trusts to protect some of their wealth.  To evade handing over monthly excess income to Medicaid a pooled income trust can be set up. 

Long-term care insurance is an alternative that may work as well but I recommend looking at the fine print and seeing what type of insurance will work best for you and your needs.  A progressive disease like Alzheimer's will only worsen over time and the amount of long term care needed will only increase.

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