Most people are aware of the fact that Medicaid is a jointly run state-federal health insurance program that provides coverage for people with very limited financial resources. If you are going to qualify for Medicare when you reach the age of 65, and you expect to be able to pay your bills comfortably, you may wonder why Medicaid should be on your radar. In fact, a very significant percentage of seniors that were never poor rely on the Medicaid program toward the end of their lives.
Medicare will pay for convalescent care after an injury or surgery, but it does not pay for custodial care. This is the type of assistance that you would receive if you were to reside in an assisted living community or nursing home. If you are in reasonably good health, and you expect to be able to take care of all of your own needs during your retirement years, you may not be too concerned.
When you look at the facts, a different picture emerges. There is a very informative website that is maintained by the United States Department of Health and Human Services called LongTermCare.gov. You can find a great deal of very useful information on this site. One statistic that they share that grabs your attention right away is the fact that 70 percent of senior citizens are going to need living assistance at some point in time.
Lifespans are steadily increasing, and the oldest segment of the population is growing more rapidly than any other. The Social Security Administration tells us that it is likely that you will live into your mid-80s if you are fortunate enough to celebrate your 68th birthday. When you think pragmatically about life as an octogenarian, you can probably envision the need for nursing home care during your twilight years.
Assisted Living Costs
The costs associated with long term care are staggering, and this is the most pressing issue within the elder law community today. Genworth Financial conducts in-depth research on an ongoing basis that is intended to keep a finger on the pulse of the long-term care costs across the United States. They provide statistics on the national level, they also go state-by-state, and they also drill down to individual cities within states.
Our elder law firm is located in Tucson, Arizona. According to their research, the median monthly charge for a private room in a nursing home in our area is $8395 at the time of this writing. If you multiply this figure by the 12 months in a year, you are looking at $100,700 for a year-long residence in a nursing home. You could sacrifice a little bit of privacy for some savings and stay in a semi private room, but you will still have to come up with about $80,000 a year.
In many cases, an elder will move into a nursing home after residing in an assisted living community for a number of years. These facilities are quite expensive as well. In Tucson, the median annual charge for a one bedroom unit in an assisted living community is $44,340 a year.
Nursing Home Asset Protection
Now that we have set the stage, we can come full circle. The Medicaid program will pay for long term care, and this is why Medicaid planning is one of the most important services elder law attorneys provide. You cannot qualify if you have more than $2000 in countable assets, but many things that you own do not count.
If you apply for Medicaid to pay for long-term care, your home does not count, but there is an equity limit of $572,000 at the present time. The bad news is that if you are still in direct personal possession of the home at the time of your death, Medicaid can seek reimbursement from the value of the home when it is sold during probate.
One vehicle that is used as a primary source of transportation is not counted, and personal effects, household items, wedding rings, engagement rings, and heirloom jewelry are not countable assets for Medicaid purposes. Unlimited term life insurance is allowed, and up to $1500 of whole life insurance can be retained.
When it comes to the assets that are countable, you could divest yourself of property before you apply for Medicaid to pay for long term care. One way to do this would be to convey resources into an irrevocable Medicaid trust. However, you have to complete all divestitures at least five years before you apply for Medicaid. If you violate this five-year look-back rule, you are penalized, and your eligibility is delayed.
Schedule a Medicaid Planning Consultation Today
As you can see, if you don’t take the right steps in advance, nursing home costs can consume your legacy. If you would like to discuss Medicaid planning with a Tucson elder law attorney, give us a call at (520) 529-4000.