Elder Law focuses on matters affecting elders, their spouse and/or their children, such as aging, disability, incapacity, illness, long-term care and nursing home planning. Legal issues commonly involving Elder Law are things such as contracts with nursing homes, arrangements with individuals who will provide services to the elderly, and agreements where property is being sold or transferred. Additionally, an Elder Law attorney can review health insurance, home care, and long term care policies. Elder law also encompasses many other areas such as estate planning, asset protection and incapacity planning.
What is Medicaid Planning? Medicaid planning is the process of protecting your estate assets from the cost of long term nursing home care. Most people are unaware that Medicare and private Medicare supplement insurance do not cover the cost of long term care. For the average individual or married couple who have worked hard all their married life, nursing home costs and costs of long-term care can wipe out their entire life savings in months.
Under limited circumstances, Medicare will cover 100% of the first 20 days and part of the next 80 days (supplement insurance may make up the difference). After 100 days, Medicare won’t pay anything and usually neither will a private supplement policy. In reality, Medicare HMOs will cover no more than a few weeks.
Costs – The average cost of nursing home care is $10,000 per month and is steadily rising. Of people reaching the age of 65, over 40% will spend time in a nursing home. There are three options to people facing potential long term care in a nursing home:
- Pay the costs out of pocket
- Purchase long term health care insurance; or
- Qualify for public benefits including veterans and Medicaid benefits
Paying the costs out of pocket is incredibly expensive and may deplete your entire estate. The Toney Law Firm recommends purchasing long term care insurance if eligible. If purchasing long term care insurance, we recommend you use a reputable company and buy at least 5 years of in-home, assisted living and nursing home coverage at a minimum of $300 per day with a cost of living benefit adjustment rider.
VA Benefits – Veteran’s benefits may be available for a wartime veteran or his or her spouse under certain circumstances (usually for an assisted living resident or with a full time aide). A veteran can receive up to approximately $2,230 per month; a spouse approximately $1,200 per month.
Exemptions – Medicaid can cover the complete cost of a nursing home. There are certain assets that are exempt from consideration and can be kept when applying for Medicaid. These include:
- Your personal residence
- One automobile
- Whole life insurance with cash surrender value of less than $2,500
- Prepaid funeral plan
- Household furnishings
- $2,000 in countable assets for a single person and
- $128,640 for a married person with a spouse in a nursing home
Restrictions – Other assets such as cash, bonds, savings, stocks, etc. may need to be used up before becoming eligible. Congress recently passed new legislation imposing restrictions on the ability of the elderly to transfer their assets before qualifying for Medicaid coverage in a nursing home.
Some provisions are:
- The look back period is extended from 3 to 5 years.
- The value of a house that can be exempt is $500,000.
- Annuities and many other planning tools will be eliminated or severely curtailed.
- Monthly gifts may create long penalty periods.
We strongly encourage you to readjust your long-term care path based on this new legislation. Preplanning is now is essential to maximize the possibility of saving all of your family’s assets. If you have any questions about this very important area of the law, please contact us.