It’s easy to think of Medicaid as a program that provides health coverage for low-income people. But Medicaid often serves another important role — covering the cost of long-term care for older Americans who need it. There are many people who do not qualify for Medicaid until they’re older and well into retirement. And at that point, Medicaid can become a true lifeline for people who need long-term care.
The Administration for Community Living says that the typical person turning 65 has an almost 70% chance of needing long-term care in their remaining years. Therefore, it is possible that you may end up in a position where you’re reliant on Medicaid to cover those costs.
Genworth says the average nursing home today costs almost $9,300 a month for a shared room and more than $10,600 a month for a private room. These are costs many people simply cannot afford on their own.
Imagine having to spend roughly $10,000 a month on a nursing home for two or three years. That could amount to more money than what you’ve saved in your lifetime. And unfortunately, there are some people who end up needing long-term care for many years, which explains why so many older Americans end up having to rely on Medicaid later in life.
Medicaid, however, is a complex program, and there are many nuances involved. Here are five key points to know about Medicaid planning in the context of long-term care during your later years.
1. There are strict asset and income limits for Medicaid eligibility.
Medicaid has strict limits around eligibility. Generally speaking, you cannot have more than $2,000 in assets to qualify. There are also income limits for Medicaid that vary by state.
It can be tricky to plan for long-term care under Medicaid if the state you live in during your working years is different from the state you plan to call home during retirement. However, you may not fully understand what counts as income as what doesn’t, which is why it’s important to have an attorney who can answer those questions.
2. Spending down assets isn’t your only option.
You might assume that if you’re not poor and you want Medicaid to cover long-term care for you late in life, your only choice will be to spend down your assets so that you and your heirs are left with virtually nothing. But what you may not realize is that there may be other options you can look at.
There are strategies that can be used legally to help you retain some of your assets. These may include, but are not limited to, giving some of your money away as gifts or setting up an irrevocable trust. These are options worth exploring with the help of a professional.
3. Planning ahead of time is key.
Some people run into trouble because they realize they need to get onto Medicaid quickly but don’t qualify based on income and assets. That’s not a situation you want to end up in, or to have a loved one end up in.
Currently, Medicaid has a five-year look-back period that determines eligibility. Simply put, Medicaid wants to discourage people from intentionally spending down assets to qualify, so financial transactions that occur during the 60-month period before you apply for Medicaid are usually scrutinized. The sooner you start planning for the possibility of needing Medicaid, the more assets you may be able to protect.
4. Medicaid is not a substitute for long-term care insurance.
If you end up qualifying for Medicaid, it could help cover the cost of long-term care. But that doesn’t mean you should ignore long-term care planning yourself.
Medicaid should not serve as a substitute for long-term care insurance because it may not provide you with a level of care you’re happy with. Also, you may not qualify for Medicaid as soon as you need it, or even at all, depending on your specific situation.
It’s a good idea to research long-term care insurance options when you’re relatively young, such as in your 40s or 50s. The younger and healthier you are when you apply, the more likely you may be to get approved for coverage. And also, applying at a younger age could mean securing long-term care insurance premiums that are more affordable to you.
5. It’s best to consult an attorney about Medicaid planning.
Medicaid planning is complex, but there are perfectly legal strategies that could help you preserve some or most of the assets you’ve worked hard to acquire. That’s why it’s important to consult an estate planning attorney and get their guidance on Medicaid planning. Having a plan in place could help you get the coverage you need without having to deplete your estate.
At The Mendel Law Firm, L.P., an estate planning attorney can help you with your Medicaid planning. Call us today at (281) 759-3213 or contact us online to discuss your estate planning needs.
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