Do you know someone currently in a nursing home, or someone receiving home healthcare? Have you ever thought about going into a nursing home or needing care yourself? Most people answer the first question yes, and the second question no. It is one of those situations where we feel, “It could never happen to me.” But studies show that approximately two out of every five people reaching age 65 will need some type of long-term care.
Contrary to the belief of many seniors, one cannot rely on health insurance or Medicare to pay long-term care costs. For all Medicare benefits, there are deductibles and co-payments – which can be substantial – and Medicare does not cover hospital costs beyond 150 days or skilled nursing home costs beyond 100 days. More importantly, Medicare does not cover any custodial nursing-home care, group-home care or non-skilled home healthcare.
A careful analysis of each individual’s personal and financial situation must be done to plan for long-term care, ensure an individual’s security and dignity and provide for family and loved ones. In determining the best method to cover the high costs of care, remember to always consider the source of the information you receive and whether the people giving it are representing your interests or their own.
“Self-insuring,” or paying your own way, may be an option. However, in the Southern Nevada area, the cost of nursing-home care ranges from approximately $60,000 to over $75,000 per year, or approximately $165 to $200 per day. If you choose to stay at home and hire home health aides, the cost of your care could be even more.
If an individual is insurable, and long-term care insurance premiums are affordable, long-term care policies can be integrated into an estate plan to provide protection without the need for transferring assets. In addition, proper estate planning in conjunction with insurance coverage can ensure that, at the expiration of the applicable term, the individual will become qualified for Medicaid.
Unlike Medicare, Medicaid is a government program that pays medical costs and long-term care costs. Medicaid is designed as a payor of last resort, however, and to qualify you must meet strict financial requirements. Although the financial requirements appear to be impossible to meet or to live within at first glance, with proper planning and legal advice, significant assets and/or income can be preserved while enabling the individual to qualify for Medicaid much sooner than anticipated. When faced with increasing care needs and often conflicting and incomplete information on planning, it is imperative that seniors explore all options before discarding any possible source of payment.
One valuable long-term care planning tool is an irrevocable Medicaid Trust. A senior doing estate planning may gift assets to the trust, keep all income from the trust for life, preserve the principal for beneficiaries and qualify for Medicaid without the trust assets being considered by the Department of Welfare as available. If properly drafted, this type of trust can provide additional benefits such as probate avoidance and significant tax savings.
In coming years, there will be continuing pressure to limit government expenditures on existing programs, due to budget deficits at the federal, state and local levels. It is thus imperative that seniors, those approaching retirement age, and their families take advantage of the planning opportunities that exist today.