Long-Term Care Planning

Dec 17, 2013

As medical technology advances and life spans increase, many Americans fear the financial strain that rising long-term care costs will have on their life savings. Proper planning can help alleviate many of those fears.

Long-Term Care Insurance

The cost of a nursing home stay will exhaust most Americans’ retirement savings quickly. Medicare, Medicaid and other funding sources may cover the costs of care for a limited time or in limited circumstances, but a large portion of the costs must be absorbed by the person requiring care. Therefore, many people rely on long-term care insurance, trusts and annuities, reverse mortgages and other options to defray the costs.

Some insurance companies are now sell long-term care insurance. Customers can purchase these policies, intended to cover medical and non-medical costs for those with a chronic illness or disability, for the expenses of home care, assisted living care or nursing home care. Long-term care insurance, however, can be quite expensive, and eligibility and policy premiums are determined using your age and health history. Long-term care insurance, therefore, might only be beneficial when you have substantial assets that need protection. Other options such as trusts, annuities or reverse mortgages may be available if you have the assets to pay for them.

Medicare and Medicaid

For those without long-term care insurance or the means to pay privately for long-term care, state and federal assistance through Medicare or Medicaid may be available. Such assistance, however, is not without a price.

Medicare is a federal assistance program adopted in 1965 to provide low-cost medical care to Americans who are over the age of 65 or disabled. But under Medicare Part A, a qualified individual may only receive up to 100 days of skilled nursing home care and Medicare funding does not usually pay for personal cares. Therefore, the individual must obtain gap insurance coverage to pay for personal cares. A small percentage of America’s nursing home patients actually receive long-term care benefits through Medicare.

Medicaid, on the other hand, is a state-administered federal program designed to provide low-income individuals long-term care and medical coverage. Applicants must meet strict asset and income tests to be eligible, or they must spend down assets to meet the standards. To determine Medicaid eligibility, each state will look back over a required period (usually 36 or 60 months) prior to the applicant’s request for Medicaid assistance to ensure the applicant has met Medicaid asset transfer regulations. Generally, if an asset was transferred during that period, but not exchanged for fair market value, the transfer will trigger a period of ineligibility. Medicaid requirements are complicated, especially since each state construes the federal program differently. To ensure you will meet Medicaid’s strict eligibility requirements, consult your elder law attorney before attempting to transfer assets or apply for Medicaid.

For many aging Americans, finding the means to afford assisted living, nursing home or in-home care can be their biggest concern. For those without the resources to privately pay for long-term care, careful advance planning with your elder law attorney can help you meet your long-term care needs.

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