Medicaid Planning

There are three ways to pay for nursing home care: out-of-pocket, long-term care insurance, and Medicaid.

Many people think that Medicare will pay for their nursing home. Unfortunately, Medicare only covers medical expenses, and long-term care is not considered a medical expense. Medicare covers hospitalizations, and will cover a couple of months of rehabilitation, but it does not cover a nursing home. Thus, the three options mentioned above.

Out-of-Pocket

According to the most recent data, the average cost for nursing home care in New Hampshire is $11,965 for a semi-private room and $13,714 for a private room. The average length of stay in a nursing home is just over two years, meaning the average total cost for a nursing home is around $300,000. If the patient is suffering from dementia the care is more expensive and the average stay is longer, further increasing this cost.

Long-Term Care Insurance

You can purchase private long-term care insurance, but there are some obstacles. First, premiums are high, and not affordable for many. Second, insurance companies either won’t sell a policy to a person over a certain age or with certain health issues, or they sell them but at even more exorbitant prices. Third, long-term care insurance has caps on both the daily and lifetime payments. This means that, like most insurances, they will cover some of your care, but not all of it.

Medicaid

Many people confuse Medicare with Medicaid. Oversimplified, Medicare is health insurance for people over 65, regardless of their financial status. Medicaid, on the other hand, is healthcare benefits available to those who financially qualify. Only people with limited assets and income can qualify for Medicaid. So, if you have money, you need to get rid of it to qualify.

However, you can’t just give your money away. When applying for Medicaid, the government looks not just at what you have now, but what you had over the past five years. This is what is called the “lookback period.” If the Medicaid applicant has made any gifts within the lookback period, then they will be disqualified from Medicaid for a certain period of time; how long depends on the size of the gift. If the gift was fairly small, you might have to private pay for only a few months, but if it was a large gift it could be years.

Many people believe that a typical revocable living trust will protect their assets from a nursing home or the State. Unfortunately, this is not true. The best way to protect assets and still qualify for Medicaid is through a type of trust known as the “Medicaid Asset Protection Trust.” A Medicaid Asset Protection Trust is an irrevocable trust, which means that you cannot change the trust after you set it up, and once you place assets such as real estate or money into the trust, it cannot be withdrawn.

The disadvantage to a Medicaid Trust is that it requires giving up control, and restricting use of your assets. Some senior citizens simply prefer not to give up control during their lifetime, which is absolutely their right.

A good candidate for a Medicaid Trust is a senior citizen who is comfortable putting assets into trust, has a child or other loved one they trust to manage the trust, and likely doesn’t need those assets to meet their daily living expenses. Because the attorney drafting a Medicaid Asset Protection Trust will need to evaluate each client’s unique circumstances in detail—discussing their family, assets, income, expenses and lifestyle, as well as properly applying complicated, ever-changing tax laws—this type of trust tends to be significantly more expensive than a typical Will or trust. However, it may be worth it. In the right situation, a Medicaid Asset Protection Trust can help keep a family home in the family and preserve a legacy that would otherwise go entirely to pay for care.

If you or a family member is worried about how to afford long-term care, please reach out to us for a free initial consultation to see if we can help put your mind at ease.

Continue to explore more of our Estate Planning Services:

• Last Will and Testament
• Trusts
• Powers of Attorney
• Advanced Healthcare Directives
• Special Needs Planning
• Medicaid Planning