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Seven in ten people over age 65 can expect to need extended care services at some point in their lives and you might be shocked to discover that as few as 3% of Americans have a fully funded plan for long-term care expenses. Many people think they don’t need LTC because they’ll get Medicare when they retire. But Medicare doesn’t cover long-term care services like assisted living or skilled nursing care. The U.S. Department of Health and Human Services estimates that 70 percent of 65-year-olds will need some type of long-term care in the future, so it’s a good idea to know what your options are now. Without proper planning, the burden of providing elder care and nursing services often falls to a spouse or other family member.
So what will my Health Insurance Cover? Medicare offers some care services so, when possible, it’s best to take advantage of those benefits first. After a three-day hospital stay Medicare will pay for the total cost of Skilled Nursing Care (SNC) for the first 20 days in a skilled nursing facility. After that, you pay around $200 co-insurance per day. After 100 days, Medicare assistance stops. If you’re unable to leave your house for medical or therapeutic care, Medicare will pay for home healthcare services. Importantly, Medicare will not cover 24-hour care. Medicare will not cover supervision costs.
What will it look like if you and/or your partner are solely relying on Medicare?*
Like I said, Medicare doesn’t cover long-term care, think of this as chronic care. They will pay for rehabilitation services after a fall for a short period, but not an extended or for an open-ended period. Remember 120 max for Medicare. However, if PT discharges a fall patient after 10 days, then Medicare stops paying at that point. You pay 100% for non-covered services, this is including most long-term care. Long-term care is a range of services and support for your personal care needs. Most long-term care isn’t medical care. While Medicare with not cover custodial care, you may be eligible through Medicaid.
Medicaid is different than Medicare because it is an option of last resort. It is there only when you are considered destitute. There are income and asset limits.
INCOME LIMITS FOR MEDICAID: To be eligible for Medicaid Long Term Care, individuals have to be under an income limit – $2,742 / month per person in most states for 2023. This is to stay eligible for Nursing Home Medicaid and Home and Community Based Service Waivers. Nursing Home Medicaid beneficiaries must also surrender most of their income to the state to help pay for their nursing home care, with some exceptions. They can keep a small personal needs allowance, usually less than $100 / month, to pay for items Medicaid doesn’t cover like books, cell phones, haircuts, etc. They can also keep enough to pay for Medicare premiums. And, most importantly for this discussion, they are allowed to keep enough to give their non-applicant spouse a Minimum Monthly Maintenance Needs Allowance (MMMNA) to prevent that spouse from living in financial hardship. However, the government’s definition of hardship usually does not meet our own. In fact, in most parts of the country the spouse is forced to live at, or below the poverty, level for the other spouse to receive the services needed through Medicaid.
ASSET RESTRICTIONS: Applicants must also meet an asset limit in order to be eligible for Medicaid Long Term Care. In most states in 2023, that asset limit is $2,000 for a single applicant and $3,000 for a married applicant. Medicaid considers all assets of a married couple to be jointly owned. So, for a married couple with both spouses applying for Medicaid Long Term Care, all of their assets would be counted against their asset limit.
What Happens when only one spouse needs Medicaid?*
When only one spouse in a married couple is applying for Medicaid Long Term Care, the non-applicant spouse is allowed to retain a portion of the couple’s assets (between $29,742 and $148,620 as of 2023 in most states) without making the applicant spouse ineligible. This is known as the Community Spouse Resource Allowance (CSRA). This amount is not usually sufficient to provide for the remaining spouse for the rest of their life. Retirement assets are depleted leaving the spouse in a much different lifestyle than expected.
If a couple’s assets exceed their state’s asset limit even after the Community Spouse Resource Allowance has been allocated, there are ways to spend those assets within Medicaid’s rules that will make help the applicant gain eligibility. This is known as “spending down” and can try to help the non-applicant avoid financial hardship. Before explaining those ways, it should be clear that Medicaid’s “Look-Back Period” prevents applicants from simply giving away their assets to become eligible. Most states “look back” into the applicant’s financial records for the previous five years to make sure they have not given away assets or sold them at less than fair market value.
Some methods that will help one spouse become Medicaid eligible, and prevent financial hardship for the non-applicant spouse, even if the couple’s assets exceed their state’s asset limit are:
- Paying Off Debt
- Buying an Irrevocable Funeral Trust
- Home Modifications and Improvements
- Buying a Medicaid-approved Annuity
It’s also important to note that when one spouse of a married couple moves to a nursing home and the community spouse continues to live in the home, the home will not count against the state’s Medicaid asset limit regardless of the home’s value. If the spouse receiving Nursing Home Medicaid passes away in a nursing home, the community spouse can still keep the home. However, Medicaid may try to collect reimbursement for care delivered after the death of the Medicaid beneficiary. This is called the Medicaid Estate Recovery Program (MERP), and it is mandatory in every state. In most cases, the only asset of value in the estate of a deceased Medicaid beneficiary is the house, so MERP may try to collect its reimbursement by forcing a sale of the house. This depends on the state and the case, and is often reserved for extreme cases, but there are ways to protect against MERP:
- Ladybird Deeds
- Medicaid Asset Protection Trusts
It’s worth noting that there are other ways to protect the home, but these are not necessarily designed to protect the home for a non-applicant spouse, rather to protect for inheritance purposes.
This is a lot to think and worry about. A plan for LTC coverage can help minimize the financial and emotional impacts on your loved ones if you end up needing these services. Long-term care coverage, like any other insurance, is least expensive when you don’t need it…so it’s a good idea to keep informed and see if it makes sense for you, your family, and your financial future. If you would like more on LTC options please reach out. I am here to help!
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***This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.