Far too many people are under the impression that there will be no reason to be concerned about health care expenses once you qualify for Medicare. It is true that the vast majority of Americans will be eligible for this coverage, but you should not make any sweeping assumptions.
When you are paying FICA or self-employment taxes while you are working, you earn retirement credits that lead to eligibility for Medicare and Social Security. It takes 40 credits, and you can earn up to four credits each year. In 2019, you get one credit for every $1360 that you earn.
Even if you never worked at all, you would still qualify for Medicare if you are married and your spouse accumulated at least 40 credits during their working career.
Medicare Break Down
You should not plan ahead for your retirement years with the expectation that Medicare will cover all of your health care expenses in full when you are a senior citizen.
The program is broken into four distinct parts: Part A through Part D. Medicare Part A is the portion of the program that covers inpatient stays in hospitals.
The majority of people do not have to pay a monthly premium for this coverage, and that’s a good thing, but there is a per benefit period deductible. This figure is adjusted annually, but it stands at $1364 at the present time.
You don’t have to pay any coinsurance if you stay for 60 days or less, but extended stays that exceed this interim are quite costly. For days 61 through 90, you are looking at a daily coinsurance payment of $341. The number goes up to $682 for days 91 and beyond.
Part B pays for visits to doctors and outpatient care, and once the deductible has been met, you have to pay 20% of the bills that are covered by Medicare. The deductible is a modest $185 a year, but there is a $135.50 premium for the vast majority of recipients in 2019.
You can use Part C to apply your benefit toward the purchase of private insurance. The final piece, Part D, is the prescription drug component. Out-of-pocket costs include deductibles, premiums, and coinsurance.
The Most Significant Gap
When you digest the information above, you can see that under certain circumstances, you could be digging deep into your resources to cover the out-of-pocket expenses. Fortunately, most retirees can absorb them with reasonable comfort, but there is one gap that very few people can shrug at.
Medicare will not pay one red cent toward the nursing home bills that you incur, and this is an extremely significant gap, because these facilities are very expensive.
In the Cincinnati area where we practice law, you can expect to pay around $100,000 for a year in a nursing home. Costs are expected to rise by 4% per year over the next five years according to Genworth Financial. As a result, if you need long-term care a couple of decades from now, the numbers can be much higher. And if you are married, your family may be faced with two separate rounds of nursing home expenses.
What Can You Do?
This reality comes as an unpleasant surprise to many people, and it is worthwhile to point out the fact that 35% of seniors will require nursing home care, with an average length of stay of one year. The picture we have painted may look bleak, but there is a widely embraced solution.
Medicaid is another government health insurance program, and it will pay for the custodial care that nursing facilities provide. Since it is a need-based program, you cannot qualify if you have more than $2000 in countable assets in your name.
That’s a low number, but there are some things that do not count, including your home. You can give gifts to your loved ones as you aim toward eligibility, but this takes careful timing. There is a five-year look back period that requires you to divest yourself of countable assets at least five years before you apply for Medicaid coverage.
Learn More About Nursing Home Asset Protection!
We provided some surface hints at the Medicaid planning process in just a few sentences here, but our doors are open if you would like to learn everything that you need to know. You can send us a message right now to request a consultation appointment, and we can be reached by phone at 513-721-1513.
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