Planning for Long-Term Care

By Rustin Diehl

As we grow older, it is common to see a decline in health and increase in expenditures on healthcare—even after years of vibrant, active living. The high likelihood of incapacity during our latter years makes it important to prepare ahead of time for the financial and legal burdens of long-term care.

About Long-Term Care and Medicaid

Long-term care is costly. On a yearly basis, nursing home costs can range from $60,000-$100,000 per year. Many people mistakenly believe that Medicare will pay for nursing home expenses. Medicare is a taxpayer funded national health insurance program for U.S. citizens that are 65 years of age and older. Besides seniors, Medicare also covers routine healthcare for individuals of all ages with permanent disabilities. Unfortunately, Medicare will not pay for long-term nursing home care. Instead of Medicare, Medicaid is the program that most people must utilize for long-term care.

It is important to remember that Medicaid is given based on financial need, unlike Medicare. While Medicare can cover routine healthcare and some short-term recover care, in the case of incapacity, Medicare will not pay for more than 100 days of inpatient care. After this period ends, a person must either pay for the long-term care himself or financially qualify for Medicaid.

Medicaid Asset Qualifications

Qualifying for Medicaid requires that a person have only modest income and very few assets (a home and a few other assets exempt from consideration by Medicaid). In Utah, for example, income cannot exceed 100% of the Federal Poverty Level. Assets exceeding $2,000 for one person or $3,000 for two people must be spent down or used up prior to Medicaid qualification.

Qualifying for Medicaid can force sale of some assets and waste significant financial resources. Fortunately, there are ways to lower the financial and personal risks associated with long-term care.

Selling Properties and Medicaid

Transferring and selling assets is a very common technique for qualifying for Medicaid. Normally, however, it is unnecessary and unadvisable to sell or transfer a primary residence. Also, keep in mind that any transfers must be made more than five years before applying for Medicaid to avoid penalties and extra wait periods.

If the Medicaid rules are followed carefully, it can make sense to sell or transfer some property permanently out of your name to a trust or to trusted family members years before long-term care is needed. Transferring property makes sense when the property does not produce income but would otherwise disqualify a person from Medicaid because of asset limits. In all property sales or transfers, use caution so that the transfer does not cause Medicaid disqualification or penalties.

Purchase Long-Term Health Insurance

If qualifying for Medicaid is not an option, consider a long-term health insurance policy. Long-term health insurance is a separate coverage above and beyond your personal health care insurance, Medicaid, or Medicare. A long-term care policy will provide a daily or monthly benefit that can help pay for long-term care expenses. It is beneficial to purchase the policy when a person is younger, because the premiums will be much lower. However, keep in mind that long-term care policies do not pay forever, and in the case of protracted incapacity like Alzheimer’s or dementia, qualifying for Medicaid might still be necessary.

Assessing your Long-Term Care Risks

In preparing for the risks of long-term care, an individual should consider his current health status and his family's health history. If health issues or history suggest long-term care is likely, preparing ahead of time is prudent. Begin planning now for long-term care when insurance premiums are lower and when properties can be sold without penalty. Finally, be certain to discuss planning options with an attorney familiar with long-term care and Medicaid rules.

Be certain to consult your attorney before making any decisions regarding Medicaid qualifications.  For further inquiries regarding Medicaid or this article, contact Attorney Rustin Diehl:  801-938-4035