Medicaid is the United States’ health care safety net. It is an insurance program for low-income and needy people that provides health-related coverage for children, many seniors, and/or people who are disabled. A widespread and dangerous misconception is Medicare will cover long-term costs. In reality, Medicare benefits for long-term care are very limited. Medicare pays only for skilled care that is deemed “medically necessary,” and it does not cover personal care required by most seniors with chronic, custodial care needs.
A recent article in The Victoria (TX) Advocate, titled “How does Medicaid factor into financial planning?“, recommends that seniors need a strategy for paying for long-term care, should the need arise. In some instances, however, some individuals may have to rely on Medicaid if they don’t have enough income to purchase long-term care insurance, the assets to pay for care themselves, or they are uninsurable.
Medicaid planning was often thought of as a viable tool for long-term planning. However, estate planning attorneys are now rethinking this strategy. Medicaid planning-which was, in essence, planning to make asset transfers, used to be the primary tool used by seniors considering long-term care costs. However, law changes and the advent of new financial products and plans will work better, they say. Medicaid “planning” is actually a misnomer as most seniors don’t plan to go on Medicaid, but rather experience an urgent care need, and there aren’t any other options. A better alternative is to obtain a long-term care insurance policy.
To qualify for Medicaid, a senior must be at what the government deems poverty level: less than $2,000 in countable assets (countable assets doesn’t include one’s personal residence and this threshold varies by state) and roughly $2,000 or less in monthly income. Even if a senior is considered well off when he or she retires, medical and long-term care costs can decrease their assets to the poverty level, which means Medicaid would be an option at that point.
Some seniors will purposely transfer or retitle assets to qualify for Medicaid. This can be risky, the original article advises. There are other methods of spending down assets which can be more beneficial to the senior-like using cash assets to make substantial home improvements and repairs, adding safety features in the home should the senior become wheelchair bound.
Another risk in depending on Medicaid for long-term care is that federal law requires states to look for recovery of Medicaid benefits. The state will put in a claim against any assets that pass through probate upon the death of the recipient. This will include assets not counted during eligibility, such as the senior’s home.
Because estate and lifetime planning can be overwhelming and wrought with pitfalls, the article advises seniors to enlist the help of an estate planning attorney and, more particularly, an elder law attorney to evaluate all options available.
Reference: The Victoria (TX) Advocate (February 13, 2015) “How does Medicaid factor into financial planning?“