Thanks to employer sponsored/other private health insurance, many go their entire without ever needing to apply for Medicaid benefits. You might be among those who have experience this good fortune. However, that could all change during your retirement years. This is because the likelihood of needing long-term care increases dramatically as you age. The high cost of that care may, in turn, leave you with no other choice than to turn to Medicaid for help.
The problem, however, is that qualifying for Medicaid can be difficult because of the low income and asset limits imposed by the program. You could find yourself faced with the possibility of having to use your heard-earned assets first before Medicaid will start helping with expenses. That is, unless you have planned ahead by including Medicaid planning in your overall estate plan. The key, therefore, is to incorporate Medicaid planning into your estate plan early on in your life.
The Need for Long-Term Care
As you age, the odds of needing to spend time in a long-term care facility increase dramatically. During your working years you have a 20 percent chance that you will suffer and injury or illness that requires long-term care. At age 65, those odds jump to about a 50 percent. If you are still alive at age 85, there is a 75 percent chance that you’ll have to spend time in a long-term care facility. Furthermore, if you are married, your spouse is looking at the same odds. This means there is a high likelihood that one of you will be faced with the need for long-term care at some point.
The High Cost of Long-Term Care
Long-term care costs are high – often much higher than people realize. Nationwide, the average cost of a year stay in a long-term care facility runs over $80,000 – and continues to increase. The average length of stay runs 2.5 years. Fortunately, long-term care costs in the State of Texas are lower than the national average. However, those low costs average around $51,000 per year for a semi-private room and $69,000 per year for a private room. Even the lower costs in Texas will still make a significant impact in your finances! This is particularly true if you have to pay out of pocket.
The Need for Medicaid
What does all of this teach us? Don’t count on your private or employer sponsored health care policy to cover the costs of long-term care! First, most employer sponsored health insurance terminates when you reach retirement age. Second, even if your coverage continues, or you have additional coverage from a private plan, the odds are that long-term care costs are not covered, unless, of course, you purchased a separate, and usually expensive, long-term care rider. Medicare won’t help either. Medicare only covers long-term care costs following a hospital stay and only for a short period of time – 100 days or less. The good news, however, is that Medicaid does cover long-term care costs for those who qualify.
Qualifying for Medicaid
Qualifying for Medicaid benefits, however, can be tricky because of the income and asset limits. Because Medicaid is a “needs based” federal health insurance program, there are both income and assets limits. Your monthly income, indexed for inflation, may not exceed certain limits. Likewise, as a general rule, the value of your other assets, the “countable resources,” usually cannot exceed a grand total of $2,000.
Simply transferring assets out of your name when you realize you need to qualify for Medicaid is not an option. This is because the program also uses a five-year “look-back” period. In essence, this means that when you apply for Medicaid benefits your finances will be scrutinized for the five year period leading up to your application. Any asset transfers made during that period will likely be disallowed. Additionally, the value of the asset transferred will be imputed back into your estate.
The solution is to include Medicaid planning in your comprehensive estate plan early on in your life. In fact, you should do it long before you actually need to qualify for benefits. Medicaid planning uses perfectly legal strategies to protect your assets, while increasing the likelihood that you will qualify for Medicaid benefits should the need arise down the road.
If you have additional questions or concerns about incorporating Medicaid planning into your estate plan, contact the experienced Texas estate planning attorneys at The Mendel Law Firm, L.P. by calling 281-759-3213 to schedule your appointment today.