How Will You Pay for Your Long Term Care?

Often I find that clients misunderstand what Medicare pays for and what Medicaid pays for. As well, the subject of how to pay for long term care is frequently not addressed until the need arises, which results in expenses that advance planning would have avoided.

Medicare, for which all citizens and permanent residents 65 or older (and certain disabled persons under 65) are eligible, is our country’s health insurance program. It pays for hospital expenses, doctors’ and other health care expenses and prescription drugs, subject to various premium payments and co-pays. It does not, however, pay for long term care.

Medicaid is a state run program (financed by the federal, state and local governments) for persons with low income and little or no resources. The federal government and each state have their own rules regarding eligibility. In New York, it is administered by the state health Department and by each county’s Department of Social Services and New York City’s Human Resources Administration. Medicaid pays for the shares of hospital and medical expenses of eligible persons that Medicare or private insurance doesn’t. It also pays for their long term care.

Although Medicare will pay for rehabilitation in a skilled nursing facility after at least three nights in a hospital, that coverage lasts only for 20 days (and as much as 80 more days, subject to a co-pay). After that, care would be considered “custodial” (long term). At that point, the nursing home bills must be paid either privately, or under a long-term care insurance policy, or by Medicaid. Since the average cost of nursing home care on Long Island currently is approximately $450 per day,and since most persons don’t have long term care insurance, qualifying for Medicaid becomes somewhere between important and essential. The problem often is, however, that no advance planning was done and financial sacrifices must be made in order to qualify.

Another common misunderstanding that I find clients have is their belief that their home is protected from Medicaid recovery (payback). Although that is true while either a husband or wife continues to live in the house, after they move out or die, the government may place a lien on the home for benefits the government has paid for long term care. Unless prior arrangements were made regarding ownership of the house, such as transfer into an appropriate trust, the government will collect the benefits paid from the proceeds of the ultimate sale of the home. Advance planning can avoid that unpleasant surprise.

Medicaid rules require recipients to notify Medicaid whenever there is a change in circumstances, including a move, a sale or a death. If a house is sold by a Medicaid recipient or spouse, the money from the sale is not protected unless, again, prior arrangements were made regarding ownership.

Simply put, Medicaid is for poor people. “Available resources” must be under $14,850 (in 2017). This is true whether the application is for nursing home care or care in the home (“community Medicaid”). Getting to that point in the least financially (and emotionally) painful manner is the goal. Proper advance planning usually alleviates much of the pain.

Other articles I have written describe in more detail the possible alternatives, including additional options for married couples, and treatment of income. They can be found on my website. My emphasis here is to state that those who are 65 and older should explore the subject rather than waiting until a crisis arises. It is also important to have in place basic tools so that others can act on yourbehalf if the need arises, such as a comprehensive Durable Power of Attorney and Health Care Proxy.

Planning for long term care is never simple, nor is the same approach best for everyone.Consideration must be given to individual needs, abilities and desires, family dynamics, the types of assets held, how they are held and how they are titled, and the tax ramifications of all proposed options.

Copyright 2017 Joseph A. Bollhofer, Esq.