There’s a long list of time-honored “planning” techniques people employ to do their own “estate planning” or attempt to qualify for Medicaid or other benefits. The signed real estate deed in the desk drawer. Adding a child to a bank account. Giving away assets to children or grandchildren. And newer on the scene, using any number of estate planning forms and the free advice available on every corner of the internet – or your hairdresser’s mother-in-law. The only problem is . . . it may not work out the way you expect.
These “Plans” Often Backfire!
The biggest threat to your assets is not estate tax or probate. It’s the cost of long-term care. According to the U.S. Department of Health and Human Services, 2 out of 3 people will require some type of long-term care services and support. 1 out of 5 seniors will require more than 5 years of long-term care.
The average stay in a nursing home is about 2-1/2 years. In Oklahoma, that will set you back around $155,000 (the state average nursing home cost is $169 per day). For most people, long-term care will be the second biggest purchase of their entire lives, after their house.
There are common misunderstandings about how long-term care is paid for and which benefits programs pay for long-term care services. Many people believe that government benefits (Medicare and Medicaid) or private insurance will be there to pay the cost of long-term care. Of these three options, only one will pay for long-term care.
Medicare is primarily an acute care benefit, covering medically necessary care. Medicare is very limited in what long-term care services it covers. Learn more at Medicare.gov
In order to have Medicare pay for long-term care services, certain requirements must be satisfied. First, you must have been admitted to a hospital for at least three days, for care and not merely observation. Then, if you require skilled care and are admitted to a Medicare-certified nursing facility within 30 days of the hospital stay, Medicare will pay for the first 20 days. The remaining 80 days Medicare will pay a small portion and you will be responsible for the bigger portion (the patient portion is around $155 per day). Some Medicare supplemental policies pay part or all of the patient portion for this 80-day period, but for those without a supplemental policy, most of the cost after day 20 will be out-of-pocket.
After 100 days, you are responsible for 100 percent of the costs of the nursing facility.
Medicare will also pay for some skilled in-home care services, provided your doctor determines they are medically necessary. Medicare does not pay for non-skilled assistance, such as help with Activities of Daily Living (ADL’s).
Most employer-sponsored or private health insurance pays for short-term skilled nursing in a similar fashion to Medicare, if at all. Long-term care benefits in a private insurance plan is exceedingly rare, so do not expect private insurance to be a source of funding.
Four Ways to Pay for Care
The reality is there are only four primary ways to pay for long-term care.
- Long-Term Care Insurance
- Veterans Benefits
- Private Pay
Medicaid is the only generally available benefit program to pay long-term care costs. Medicaid pays the majority of long-term care costs in the United States, although it is important to realize when Medicaid will pay and what it will pay for. To qualify for Medicaid in Oklahoma, your income and your assets (what Medicaid calls “resources”) must be below established maximum amounts, and you must meet certain other eligibility requirements. And unlike Medicare, Medicaid eligibility is based in large part on your need for assistance with ADL’s.
There are a number of planning techniques that can assist seniors and their families with qualifying for Medicaid. Just because your income and assets are above the eligibility amount does not mean you can’t get qualified for Medicaid. However, a word of caution is also in order: it’s easy to get into trouble, often with long-lasting results, trying to qualify for Medicaid by doing things like “giving everything away” or adding kids to the bank account. And when it comes to Medicaid, the burden of proving eligibility is on the person applying. If you can’t prove you meet the eligibility requirements, you will be denied.
What Alternatives Do I Have?
For many people, the alternatives to Medicare and Medicaid are limited and concerning. There is, of course, the option to private pay. Even for people that have the money to do that, there is usually a desire to protect the value of their estate, as well as a fear that they will run out of money. In cases of early-onset Alzheimers, care sometimes stretches more than 10 years, costing over $500,000. And there’s the risk that the first spouse in a nursing home depletes the couple’s assets and leaves the second spouse with little to live on.
Similarly, it could fall to the children to pay. In some cases where the senior has transferred all their assets to a child to try to qualify for long-term care only to discover that doing so caused a Medicaid eligibility penalty, it falls upon the children to attempt to liquidate the assets and fund the care during the penalty period. There are also cases where seniors have transferred assets and the assets are later lost in a divorce or lawsuit.
Some people purchase long-term care insurance. There is a place for insurance in some cases, and the State of Oklahoma rewards people who qualify for Medicaid after receiving a period of benefits from qualifying long-term care insurance by allowing them to keep more of their assets. Long-term care insurance has its problems, however. It’s expensive, costing thousands of dollars a year. And even worse, many people with insurance policies are receiving annual renewal notices with substantial premium increases — in extreme cases, increases of over 50% in a single year. It raises the question whether it’s worth it, not knowing what the cost will be from one year to the next.
Veterans Benefits round out the list of ways people pay for long-term care. In Oklahoma, given our generally lower cost of long-term care options, VA benefits can be a valuable and meaningful component of a long-term care plan. Certain eligible veterans and their spouse or surviving spouse are eligible for the VA pension program that pays Housebound or Aid and Attendance benefits. These two benefits pay for the veteran to purchase long-term care services such as home care or pay nursing home costs. In some cases, the veteran can even receive benefits to pay a family member to provide care.
The advantage of VA Pension benefits is the flexibility it offers since the veteran receives cash that can be used as needed. However, like Medicaid, the Housebound and Aid and Attendance benefits are based on financial need. As with Medicaid, a number of planning techniques may enable a person to qualify who would otherwise exceed the income and asset limits. Even if you’ve been denied benefits or been told you don’t qualify, working with a VA accredited Elder Law Attorney can maximize your opportunity for this benefit.
The Elder Care Law Center provides a no-cost VA Pension eligibility analysis for qualifying veterans.
We regularly help clients obtain eligibility for Medicaid and VA benefits using sophisticated legal and financial planning techniques. We’ll tell you all your options, then you choose how to proceed. If you are concerned about paying for care, or you want to learn how to qualify for benefit programs to help cover the cost of long-term care, contact us or call (405) 435-9700.