If you are from my generation, you remember watching variety shows like the Ed Sullivan show. All of us remember watching the trained dogs jump through Hula-Hoops.
That is the best picture I can think of to illustrate the financial “tricks” you will have to do in order to get help from Medicaid with your Long Term Care expenses when you get older.
Neither Medicare nor private Major Medical insurance will help you pay for a Home Care Aide if you need help to stay at home because you are no longer able to do the Activities of Daily Living (ADL)
Medicaid is, by far, the biggest payer of Long Term Care bills in the United States today. However, before you can get help from Medicaid, you will need to “jump through Medicaid’s hoops.”
Each state has its own regulations. Although there are some hoops that are common from one state to the other, the numbers that are listed in this post are approximations. If you need the actual numbers for your state, I encourage you to do some further research directly with your state’s Medicaid offices.
In this post I merely want to point out the “hoops” that Medicaid requires before they will pay for Long Term Care bills. At the end, I will share with you an option for those people who are not willing to jump through Medicaid’s hoops.
1. ASSET TEST
Before you are able to qualify for Medicaid to help you pay the nursing home or Home Care aide, you will need to “spend down” your savings until you qualify for Medicaid in your state. Most states will allow your spouse continue to live in your house and have 1 automobile. The other assets that are in your name will need to be liquified and spent on your Long Term Care before you will get any help from Medicaid.
Most states will allow your healthy spouse to keep around $100,000 but you are only allowed to have around $2000 in your name.
(Warning: These numbers are just approximations. States are liable to differ. Contact your local Medicaid office to determine exactly what amount of assets you are allowed to keep.)
2. INCOME TEST
Not only will Medicaid want to make certain that you are not hiding assets that could be used to pay your Long Term Care bills, they will also make certain that your income is used to pay for your Long Term Care. You will be allowed to use a minimal amount of your income, around $60 a month, for your personal needs (i.e. soap, shampoo, deodorant, etc.) but any income you have over that nominal amount must be used for your Long Term Care expenses.
(Warning: The figure of $60 is just an estimation. The stipend that is allowed by Medicaid may differ between states. As with the Asset Test, if you want to know the correct amounts for your state, contact your local Medicaid office.)
3. ESTATE RECOVERY
After you have jumped through Medicaid’s hoops and “spent down” your life’s savings, Medicaid may pay your Long Term Care bills, but there is a catch.
Although your spouse is allowed to continue to live in your home, Medicaid has the right to place a lien on your property. When both you and your spouse die, Medicaid has first claim to your estate.
If there you do not have sufficient Life insurance or your spouse’s savings are not sufficient to reimburse Medicaid for what they paid on your behalf, Medicaid has the right to require your house to be sold and the funds used to reimburse Medicaid.
If there is any money left over after Medicaid is reimbursed, your heirs can divide that amount.
4. LIMITED CHOICE
In addition to the hoops mentioned above, Medicaid has its own set of rules. Not every facility will accept Medicaid patients.
If your Long Term Care expenses are paid by Medicaid, you will be required to use providers who are approved by Medicaid.
If you would rather choose an aide or facility that is not approved by Medicaid, your state will not help with your bill.
I was taught that it is wrong to point out a problem unless you also offered a solution.
The Deficit Reduction Act of 2005 authorized states to create Partnership Plans. Partnership Plans are designed to encourage citizens to take responsibility for their own potential Long Term Care expenses and leave Medicaid funds for those who really need the program.
In other words, Partnership Plans are designed to eliminate abuse of Medicaid by those in the middle class.
Partnership Plans are relatively simple if they are used correctly. For every dollar of insurance that is used to pay for Long Term Care, you are able to shelter a dollar from Medicaid.
If you purchase a Partnership Plan equal to your assets and after your benefit pool is exhausted you still need Long Term Care, Medicaid will waive the Asset test. You will be able to keep your life’s savings.
Your healthy spouse will be able to use your life savings to maintain his or her lifestyle during retirement.
Partnership Plans also remove any exposure to Estate Recovery if they are set up correctly. If your Partnership Plan benefits equal the value of your estate, Medicaid will not put a lien on your house if they end up having to pay something towards your Long Term Care expenses.
(Warning: Be very careful when you set up your Partnership Plan. As your estate value increases, your Partnership Plan should also. If your estate increases faster than your Partnership plan, there is a chance that Medicaid can impose the Asset Test and Estate Recovery if they end up having to pay for your Long Term Care expenses.)