If you have never looked into the subject of long-term care and the costs that go along with it, you are about to obtain some very important information. In this blog post, we will explain why Medicaid planning is something that should definitely be on your radar.
Limitations of Medicare
If you work and pay taxes for at least 10 years, or if your spouse has done this, you will qualify for Medicare when you reach the age of 65 under currently existing laws.
This health insurance program for senior citizens will provide a solid underpinning, but there are out-of-pocket costs that you should budget for in advance. There is a per-benefit period deductible for hospitalization, and there can be significant co-payments for especially long stays.
You have to pay a monthly premium for the portion of the program that covers visits to doctors (Part B). Plus, Medicare does not pay for all of the expenses that are incurred.
The program will pay for 80 percent of expenses that are incurred, and you are responsible for the other 20 percent. A recipient must also pay premiums, co-payments, and deductibles for the prescription drug portion of the program.
In addition to these out-of-pocket costs, there is a very significant potential expense that is not covered at all. Medicare will pay for convalescent care if you are going to recover from an illness or injury. However, it will not pay for custodial care.
This is the type of care that nursing homes and assisted living communities provide. Here in the Burlington, Vermont area, you are looking at well over a hundred thousand dollars for a year in a nursing home, so the situation can be financially devastating.
Most Seniors Will Need Long-Term Care
When you have been healthy and fully capable of handling all of your affairs throughout your life, you may assume that you will never need living assistance. Without question, many people that are in their 60s and early 70s can function very well independently.
However, it becomes a bit more difficult as the years pass, and it is wise to understand the longevity statistics. If you are around long enough to collect your Social Security benefit, it is likely that you will live until you are at least 85.
The Alzheimer’s Association does important work educating the public about this horrible disease. If you visit their website, you can obtain a great deal of useful information.
According to research that they cite, Alzheimer’s disease strikes about four out of every 10 people that are 85 years of age and older. Many of them will require nursing home care.
There is a website is maintained by the United States Department of Health and Human Services called LongTermCare.gov. They have a lot of interesting data on their site as well.
According to the site, 70 percent of seniors will need some form of long-term care, and 35 percent of elders will eventually reside in nursing homes.
The Medicaid Solution
Medicaid is a government program that will pay for long-term care, and this is why Medicaid planning is important. Since it is intended for people with limited financial resources, there is an asset limit of $2000 in Vermont.
However, your home (with a $595,000 equity limit), a motor vehicle, household items, personal effects, wedding and engagement rings, and heirloom jewelry are not counted.
When a married person is applying for Medicaid to pay for long-term care, and there is a healthy spouse that is still living independently, there are allowances. The healthy spouse can retain ownership of half of the assets that are shared by the couple, but there is a limit that stands at $128,640.
Under Medicaid rules, the healthy spouse can continue to receive income that is brought in by the institutionalized spouse when it is needed. This is called a Monthly Maintenance Needs Allowance, and the maximum allowance is $3216 per month at the time of this writing. There is also a minimum allowance of $2113.75.
When it comes to assets that are counted, you could give gifts to loved ones, or you could fund an irrevocable Medicaid trust. However, there is a five-year look back period. Your eligibility will be delayed and you will have to wait out a penalty period if you give away assets within five years of the submission of your application.
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If you would like to discuss Medicaid planning with a licensed elder law attorney, our doors are open. You can send us a message to request an appointment, or you can give us a call at 802-879-7133.