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Medicaid And Long Term Care Planning

Thinking about what old age will be like isn't something most people spend much time contemplating.  That's understandable, its hard to deny that even under the best circumstances life as a "senior citizen" is going to very different than everything that has come before.  So, its a depressing subject.  Unfortunately, the reality is that nearly 40% of people who live past the age of 65 will spend some time in a nursing home, for many of them those stays will be the last few years of their lives.  No one wants to think its going to happen to them, but its worth remembering that nearly all the current patients in nursing homes probably thought the same thing 10 or 20 years ago.  It can happen, it does happen and not planning for it, well in advance, can have tragic results for spouses, children and the people who actually require long term care.

Facts You Need To Know

The costs of long term care in a nursing home can be staggering and often come as a surprise to spouses and family members when a loved one requires institutionalization.  In New York State the average monthly cost of nursing home care is $7,000-$10,000/month, depending on where in the state a person is located.  In the Hudson Valley, the 2005 costs averaged nearly $9,000 a month!  The average stay for a person over the age of 65 who is receiving "custodial care" (rather than rehabilitative care) is almost 3 years.  Thus, the average stay for an elderly person in a nursing home ends up costing $300,000.  As staggering as that figure is it doesn't include the cost of physicians, prescription drugs or diagnostic tests.  Sadly, these costs have been rising far faster than inflation or wages and are expected to increase 5-7% a year over the next decades.  Thus, in 2020 (when many 'baby boomers will be reaching their 70's) it is quite likely that a typical nursing home stay for an elderly person will cost anywhere from $700,000 to $1,000,000!  

Common Misunderstandings About Long Term Care

Many people are under the impression that health insurance and/or Medicare will pay for the costs of long term care in a nursing home.  Generally, that's not true.  Neither Medicare or most health insurance programs will pay for care that is "custodial" rather than rehabilitative.  Old age maladies, such as Alzheimer's, dementia, incontinence, inability to feed or otherwise care for oneself are not conditions that Medicaid or standard health insurance will cover.  The expense of nursing home institutionalization is typically covered in one of three ways:

• -Long Term Care Insurance
• -Out of pocket "private pay"
• -Medicaid

As the cost figures, above, make clear the option of  "private pay" is beyond the means of most elderly people, even those who believe they have enough money to live comfortably in their retirement.  What many do not understand is that Medicaid (the most common source of nursing home care funding) is a "means tested" program that is only available to people who do not have any significant assets or income.  All too often, before an elderly person can "qualify" for Medicaid they will be forced to "spend down" the savings and investments they have spent a lifetime building up and, thereby preventing them from passing on property and money to their children.  The same problem can also affect spouses, depriving them of assets and income that should have made retirement a comfortable and enjoyable experience.

Moreover, current law makes "transfers" such as gifts to children or placing assets in an irrevocable trust, actions that can create a "penalty period" during which a person will not be able to qualify for Medicaid benefits.   Thus, careful, advance planning is required if one wishes to avoid what is known as "Medicaid impoverishment".  Gifts and trusts can protect assets, but only if they are accomplished well in advance and as part of an overall estate plan.  The problem of how to go about protecting assets is likely to get much worse as more and more baby-boomers reach retirement age and the prospective costs of Medicaid funding of long term care become more apparent (note: pending legislation in the U.S. Congress threatens to make draconian changes in Medicaid law as it affects long term care, you can read more about it here).

Long Term Care Insurance (LTCI)is a very viable alternative to "private pay" or Medicaid.  However, just like the rest of estate planning activities it needs to be considered long before its likely to be needed.  LTCI policies are available in a variety of different forms.  They can provide payment for long term care at home or in a nursing home facility.  They can set up to cover care for a limited period of time or for as long as needed and can cover expenses up to a certain amount or for all related long term care expenses.  However, the premiums associated with LTCI are very high unless the insurance policies are taken out while a person is still relatively young (ideally, the best time to take out a LTCI policy is age 45-55).  For a person who is already at or near retirement age the costs of LTCI are so large that they don't represent a viable option.  Also, these policies can be very complex to understand exactly what is covered and to what extent its covered (does it take into account inflation, for example).  You can learn more about Long Term Care Insurance here..

Planning Options

Depending upon your situation there are a variety of different long term care strategies you can pursue, including gifting to children and/or spouse, separating title to assets between spouses, creating irrevocable trusts that contain certain assets and even transferring real property to children while retaining a life estate.  None of these options should be pursued without the advice and counsel of an attorney who is actively engaged in an "Elder Law" practice.  Making sure that your strategy meets your goals for income, protects your assets to the greatest degree possible and is within the law requires expert legal advice.

Available on this website is information about Estate Planning, Wills, Health Care Proxies, Living Wills, Powers of Attorney

If you are interested in reading more about the legal debate over Medicaid funding of long term care visit Glenn Magnell's web blog

For more information you can contact Glenn W. Magnell at 845-294-0585 or by email at: gmagnell@stormkinglaw.com

Contact Information

If you would like a consultation or wish to arrange for representation on any Social Security matter, criminal matter, drawing up a living will, testamentary will, trust and estate planning or health care proxy, you can contact Glenn W. Magnell at either his Goshen or Cornwall offices. 

Goshen Office: 162 Main Street, Goshen, N.Y. 10924    Phone: 845-294-0585    Fax: 845-926-4091

Cornwall Office: 151 Continental Road, Cornwall, N.Y. 12518   Phone: 845-534-7848  Fax: 845-926-4091

Email: gmagnell@stormkinglaw.com

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