You may feel confident about the health care expenses that you will incur as a senior citizen, because you are going to qualify for Medicare coverage. This government health insurance program will help, but you should be aware of the gaps.
There are some reasonably significant out-of-pocket expenses that you must pay for covered care and treatment, but these expenses are manageable for people who plan ahead effectively.
However, there is a very large expense looming that may not be so manageable. Medicare does not pay for custodial care. This is the type of care that is received in nursing homes and assisted living communities.
If you are under the assumption that most people never need long-term care, you are mistaken. According to the federal government, seventy percent of senior citizens will eventually need help with their activities of daily living.
Nursing homes and assisted living communities are very expensive. We practice law in Naples, Florida, and the annual average charge for a private room in a Naples area nursing home exceeds $120,000. The average annual cost for a private one-bedroom unit in an assisted living community was over $51,285 in 2015.
In 2016, the maximum Social Security benefit is $2639 per month. As you might imagine, most people do not draw this maximum. The Social Security Administration tells us that the average monthly benefit in 2016 is $1341.
When you apply these numbers to the long-term care figures, you can see that they don’t add up very well if you have to pay for long-term care out of pocket
What’s the solution? If you were to go to a Medicaid attorney, you would find out that the most widely embraced solution is Medicaid.
Need-Based Health Insurance
The Medicaid program is another government health insurance program. It is a jointly administered federal/state government program.
Medicaid will pay for long-term care. However, you must be able to meet the eligibility requirements, and this can be challenging because Medicaid is a need-based program.
The asset limit for a single applicant is just $2000. However, the good news is that some of the things that you own are not considered to be countable assets for Medicaid purposes.
You can retain ownership of your home, and there is no equity limit if a healthy spouse is remaining in the home. One vehicle that is used for transportation is also allowable under Medicaid regulations.
In addition to the home and the vehicle, you can maintain possession of your household goods. Your personal effects are not considered to be countable assets, and you can also keep your wedding ring, your engagement ring, and your heirloom jewelry.
Whole life insurance is life insurance that has a cash value. You can have up to $1500 in whole life insurance. Plus, you can have unlimited term life insurance. This is life insurance that you can’t cash in.
Burial plots are also excluded.
Because of the asset limits, people often give gifts to their loved ones before they apply for Medicaid so that they can become eligible. This is often referred to as a Medicaid spend down. You can give direct gift to family members who would have been inheriting them anyway, but there is another option.
An irrevocable Medicaid trust can be established and funded. Assets in the trust would not be counted by the Medicaid program if you were to apply for eligibility, but you could continue to receive income from the earnings of the trust before you apply for Medicaid coverage.
A Medicaid attorney can be of great assistance when you are positioning your assets with future Medicaid eligibility in mind. If you want to qualify at the right time, intelligent and informed advance planning is key, because there is a five-year look-back. You have to give your gifts, or fund your trust, at least five years before you apply, or your eligibility will be delayed.
The length of the period of ineligibility would be tied to the amount of the gifts. For example, if you gave away enough to pay for two years of long-term care, you would be ineligible for two years.
Contact Us to Schedule a Consultation
The average length of stay for nursing home residents is over two years, and one tenth of people in nursing homes require the care for at least five years. Paying out-of-pocket could consume all or most of what you intended to leave to your loved ones, so action is required to protect your resources.
If you would like to discuss things with a licensed Medicaid attorney, call us at 239-225-7911 or send us a message through our contact page to set up a consultation.