When you hear the term “Medicaid planning,” it may sound like an oxymoron. Since Medicaid is a safety net health insurance program for people who have fallen on hard financial times, why would anyone plan ahead to try to be in this situation?
This is a logical line of thinking, but as we all know, the government sometimes goes about things in rather confusing ways. In fact, a very significant percentage of older Americans can benefit from the process of Medicaid planning. If you are an adult with aging parents, you should definitely understand the facts.
What are the odds?
People value their independence, and many folks continue to take care of themselves, even when they get older. For this reason, a lot of elders assume that they will always be able to handle all of their own day-to-day needs. They may accept the fact that they may need a little bit of help here and there, but family members would surely be willing to stop by now and then to handle the heavy lifting.
There are people who can get by with this minimal amount of support, at least for a while. However, the stark reality is that a very significant percentage of seniors require full-time residence in a nursing home or assisted living community eventually.
According to a study cited on Caregiver.org, 35 percent of Americans who are 65 years of age or older will eventually require nursing home care. In all, 70 percent of senior citizens will need some form of living assistance before the end of their lives.
The statistics paint a compelling picture, so you should certainly work together with your parents to confront this eventuality.
Who pays for long-term care?
Since we have programs in place that provide the basics for senior citizens like Social Security and Medicare, you would think that the powers-that-be have a plan when it comes to long-term care expenses. In fact, Medicare does not pay for a stay in a nursing home or assisted living community, and it won’t pay for professional in-home care either.
There is such a thing as long-term care insurance, and it is a viable option. However, the premiums are expensive, and they get higher as a person gets older.
How much does long-term care cost?
There have been various different studies done over the years, but at the present time, Genworth Financial is probably the best source for this information.
We practice law in the greater Indianapolis area. According to a well researched Genworth survey, the median annual cost for a semi-private room in a nursing home in our area is almost $75,000 at the present time. If you have a parent who would prefer more privacy, you are looking at a median charge of over $97,000 annually for a private room.
How long is the average length of stay? Clearly, this number is always going to be in flux, but a government survey a few years ago put the figure at two years and three months. One in ten seniors who reside in nursing homes will require the care for at least five years.
Will Medicaid pay for long-term care?
Medicaid does in fact pay for long-term care, and the majority of seniors in nursing homes are enrolled in the program. Most of these people were never financially needy when they were younger.
This is why Medicaid planning comes in. If you and your parents do nothing to prepare for long-term care costs, and they require nursing home care, they could wind up paying out-of-pocket until all of their resources are exhausted. They would then qualify for Medicaid to pay for the rest of the care that they need.
On the other hand, you could work together as a family to implement a plan to preserve resources. It is possible for seniors to give gifts to loved ones before applying for Medicaid. Direct gift giving is an option, but many people will fund irrevocable Medicaid trusts.
Timing is important, because the gift giving or the trust funding must be completed at least five years before the application for Medicaid coverage is submitted. If this time frame is violated, eligibility for Medicaid is delayed.
Schedule a Consultation
If you have never really thought about any of this, the information that you have just read has probably gotten your attention. We have shared the basics, but clearly, there is a great deal to digest if you want to help your parents prepare for long-term care costs.
We can answer your questions and help you put a plan in place of you decide to proceed. To schedule a free consultation, call us at (317) 684-1100 or send us a message through our contact page.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.