Before we answer the question that serves as the title of this blog post, we have to provide a bit of background information. Many people hear the term “Medicaid planning” as it applies to senior citizens, and they get a bit confused. Why would you need Medicaid if you are going to be enrolled in the Medicare program? And of course, Medicaid is only available to people with very limited resources, so most retirees would not qualify for Medicaid coverage.
This confusion is understandable, but clarity will start to coalesce when you understand all the facts. Medicare is a very valuable source of health care insurance, but it does not cover everything in full. There are deductibles, co-payments, and monthly premiums that must be paid out-of-pocket.
They can add up considerably for some people, but in most cases, these expenses are manageable to one extent or another. However, there is one huge gap in the coverage that can have a very negative impact on your legacy. The Medicare program will pay for convalescent care after an injury or illness, but it will not pay for custodial care. This is the type of care you would receive in a nursing home or assisted living facility, and in-home health aides also provide custodial care.
Long-Term Care Costs
It is certainly not easy to get out a pen and write a check to pay for a stay in a nursing home. Genworth Financial does a lot of research into the ongoing evolution of long-term care costs in the United States. They provide national figures, and they also drill down state-by-state, and they even look at assisted living costs in larger cities.
We are located in Cincinnati, Ohio. In our city, the median monthly charge for a private room in a nursing home in 2017 was $8813. If you do the math, this factors out to over $105,000 per year. The median annual charge for a one bedroom unit in an assisted living community in our city was $59,880. Some people can receive the assistance that they need in their own homes from skilled health aides. You don’t save much if you go this route, because the median cost for a home health aide in our area was $4195 per month last year.
The Medicaid Solution
Now that we have set the stage, we can get to the point of this blog post. Medicaid planning is important for people that are looking ahead toward their senior years because this program will pay for long-term care. It is true that it is only available to people who can demonstrate a significant level of financial need. There is a countable asset limit of just $2000, but the word “countable” is quite operative.
Some things that you may have in your possession are not counted when Medicaid is determining your eligibility status. Your home is not looked upon as a countable asset, but there is an equity limit. It is adjusted periodically to account for inflation, but at the time of this writing, it is $572,000 in the state of Ohio.
Other non-countable assets include one vehicle, wedding rings, engagement rings, heirloom jewelry, furniture and other household goods, and personal effects. An applicant may possess unlimited term life insurance and as much is $1500 of whole life insurance. If you have a prepaid burial plot, it would not be counted, and you can have up to $1500 set aside for final expenses.
Medicaid Spend Down
When it comes the assets that are countable, you could engage in a process called a Medicaid spend down in an effort to prepare to obtain Medicaid eligibility. This will typically involve giving gifts to your loved ones, or you could establish an irrevocable Medicaid trust. However, you have to be aware of the five-year look-back period. You are penalized and your eligibility is delayed if you give away assets within 60 months of the submission of your application.
The duration of the penalty will depend upon the amount that you gave away as it compares to the average cost of long-term care in Ohio. To provide a simple example, let’s say that the state determines that the average charge for a year in a nursing home is $90,000. You gave away $270,000 within this five-year period. This would pay for three years of nursing home care, so your eligibility would be delayed by three years.
It Is Never Too Late!
Even if you need long-term care while you are in direct personal possession of assets, Medicaid planning is still possible. The circumstances would be less than ideal, but we can do everything that we can to help you preserve resources for the benefit of your loved ones. If you would like to discuss your situation with one of our elder law attorneys, give us a call at 513-721-1513 to schedule a no-obligation consultation.