You probably see a lot of advertisements trying to convince you to plan for Medicaid in order to obtain long term care coverage. Long term care is home care (for people who live in their homes but need help with daily activities) and nursing home care.
I, on the contrary, will show you that if you are over 60 and fall into a certain category, you might not need to plan for Medicaid. Below are the 3 reasons you do not need to think about long term care planning.
1. You have over $1MM in savings that you do not mind spending on your own health care.
Approximately 70% of the seniors can expect to need some form of long term care. Long term care can be in the form of home care services (home attendants) where a hired helper comes for a few hours a day to give assistance in daily living, or in the form of a nursing home.
On average, nursing home costs approximately $14,000 a month in New York City. The annual amount ranges from $140,000 a year in Queens to $180,000 in Manhattan, and the cost is rising rapidly. The average stay in a nursing home for a patient is approximately 2 years (which means that some people may stay there for 4 years or longer).
Home care services may range from a home attendant coming for a few hours each day to assist with shopping and cleaning, to 24 hour a day care. Usually, the length of time required for a senior increases as the diseases and the weaknesses progress. A 24 hour a day home attendant that is privately paid can cost up to $500 a day, translating into the same cost as a nursing home – $180,000 a year.
As I wrote earlier, Medicare generally does not pay for long term care. At this point, Medicaid is the only government program that pays for home care and nursing homes.
In general, if one expects to need some form of home care for several years, and then eventually to need nursing home care, the overall cost of this care can be $1MM or more. If you have this money and do not mind spending it on your own long term care, then you do not need to think about Medicaid planning.
2. You have a crystal ball
A lot of people think that they do not need to plan for long term care, because they will do so only when the need arises. Others believe that they will not need long term care at all, and their family will take care of them. However, there are many situations when planning in an emergency is not an efficient method and can result in a large loss of money.
For example, Medicaid imposes a penalty for all uncompensated transfers made in the 5 years prior to an application for nursing home coverage. If there were any gifts made (this often happens when the family realizes that a loved one’s health is declining rapidly), Medicaid will refuse to cover the nursing home cost for up to 5 years from the date of application. The family will have to pay privately from its own savings.
There are ways to reduce this penalty period, but in general, at least ½ of the assets will have to be used to pay for nursing home cost. Planning ahead of the need is the best method of protecting your assets.
3. You have long term care insurance
This is one of the best reasons not to plan for Medicaid long term care. A long term care policy may cover home care services and nursing home costs.
However, before you feel completely complacent, you should ask yourself the following questions about your policy:
Does it provide enough coverage? You need to review the long term care policy to see the amount of coverage that it provides. Some policies pay only $250 a day. A nursing home private room or a 24 hour home attendant can cost up to $500 a day. The money that is not paid for by the insurance will have to come from your savings.
Does it last for a sufficient time? Some policies only provide coverage for a limited number of years. Have you thought about your expenses if the coverage expires?
Are you able to pay the premiums for the policy? You need to review if you are able to continue paying for the long term policy. Some policies have recently increased their annual premiums by 20-50% a year, to make up for the unexpected costs that they have to bear. Even if you have long term care policy now, will you still have it when the need arises?
Overall, if you fall into one of the above 3 categories, you may not need to plan for Medicaid. If you do not, however, you should consider talking to a Medicaid planning attorney who will review your individual situation and suggest an optimal course of action.
This article only offers general information. Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions. As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney client relationship.