If you’re like most Americans who have worked hard, saved for retirement, and taken the time and trouble to structure your assets so that they will provide for you and for your heirs, you have probably never considered the possibility that you might be reliant on Medicaid in later years. However, hundreds of thousands of people in the United States are currently dependent on Medicaid to pay for nursing home care.
Long-Term Care Statistics
According to the Kaiser Family Foundation, there are currently about 1.4 million people in nursing homes across the country, at an average cost of about $82,000 per year. Those costs can wipe out a lifetime of savings, especially for the 24% of nursing home residents whose stays exceed three years.
While some of these residents pay for long-term care with their own funds, or through long-term care insurance or other coverage, Medicaid picks up the tab for about six in 10 nursing home residents. New Jersey residents rely on Medicaid for long-term care at about the national rate, but New Yorkers come in even higher, at about 67%.
Obstacles to Medicaid Coverage for Nursing Home Care
One of the greatest concerns about relying on Medicaid for long-term care expenses is the degree to which personal assets must be exhausted before the nursing home resident qualifies for benefits. This presents particular problems when the long-term care is not (or may not be) lifelong, and may leave an elderly person impoverished after a months-long nursing home stay, with no opportunity to rebuild resources to return to independent living.
Another significant complication arises when the person in need of long-term care is married and the spouse will continue to live independently. In 1988, the U.S. legislature enacted protections commonly known as “spousal impoverishment provisions” to ensure that the spouse who continues to live independently is able to continue to support himself or herself. These provisions protect a certain amount of monthly income for the independent spouse, along with a significant amount of home equity. While these protections have improved the situation, they have not solved the whole problem—particularly for independent spouses who live in areas where the cost of living is high.
Medicaid Recoupment after Death
Another concern for many people who require long-term care is the likelihood that assets such as the family home will be lost to state recovery of expenditures on behalf of the deceased. Whether or not assets are subject to recoupment depends to a great degree on how those assets are titled, which means that how you plan your estate and structure your assets may determine whether a lingering final illness consumes your estate or leaves your legacy intact.
Long-Term Care Planning Can Protect Your Spouse and Your Estate
Not all assets are counted for purposes of determining a Medicaid spenddown, and whether or not assets are subject to recovery by the state depends in large part on how ownership is structured during the Medicaid recipient’s lifetime. Medicaid planning is a personalized process that is dependent on a number of factors, including the nature and value of the estate and the person’s marital status. And, there are potential long-term care planning options that do not involve Medicaid.
Some strategies and solutions to discuss with a qualified estate planning attorney include:
- The use of one or more types of trust to hold property you wish to protect
- The purchase of an annuity
- Identifying the most beneficial approach to titling real estate
- Long-term care insurance
Unfortunately, many otherwise financially responsible people neglect this aspect of estate planning. When illness or infirmity strikes, an estate that took a lifetime to build can be destroyed in just a few years. The best time to attend to long-term care planning is long before you can imagine needing it.