The Medicaid program is something that you may not think much about if you are not financially needy. This is a jointly run federal/state government program that provides health insurance for people who can prove that they are largely without monetary resources.
However, when you start to look ahead toward your senior years, Medicaid may find its way onto your radar. Read on to find out why.
Nursing Home Costs
The United States Department of Health and Human Services has stated that 70 percent of people reaching the age of 65 are eventually going to need help with their activities of daily living. Approximately 25 percent of people who are at least 85 are residing in nursing homes.
Genworth Financial has been conducting an ongoing study that examines the state of long-term care around the United States. They have compiled statistics for every state, and they also have numbers for specific metropolitan areas.
We practice law in Hartford, Connecticut. According to the study, in 2015, the average annual charge for a private room in a Hartford area nursing home was $160,600. If you are willing to sacrifice a bit of privacy for some savings, the benefits would be modest. The cost for a semi private room is just under $149,000 per year on average.
A government study was conducted a few years ago, and it found that the average length of stay is 2.4 years, and 10 percent of people in nursing homes require the care for at least five years.
If you are thinking that you are not concerned about long-term care expenses because you will be qualified for Medicare coverage, you are harboring a misconception. Medicare does not pay for custodial care. The program will pay for convalescent care after surgery for as long as 100 days, but it will not pay for help with your normal day-to-day activities.
The Medicaid Solution
Medicaid is set up to absorb long-term care costs, but you cannot qualify if you have countable assets that exceed $2000 in value. In spite of this very low asset limit, people who retired with some resources often qualify for Medicaid through a process that is known as a Medicaid spend down.
You could literally spend virtually all of your resources before you apply for Medicaid coverage, but most people will spend down by giving assets to their loved ones.
This makes sense, and you may assume that you can give your children their inheritances in advance if you ever find out that you need long-term care. However, you cannot do this without being penalized, because there is a five-year Medicaid look-back period.
The program is in place to help people who are financially needy. The spirit of the program would be violated if you could give away assets one day and qualify for Medicaid on the next day.
The five-year look-back period prevents reactive divestitures. You must complete your gift giving at least 60 months before you submit your application for Medicaid coverage.
If the program administrators were to find that you have in fact given gifts within this five-year look-back period, your application would be denied initially. A penalty period would be imposed, and you would not be able to obtain coverage during this interim.
The duration of the penalty would be calculated based on the cost of nursing home care in Connecticut and the amount of the gifts that you gave within the look-back window.
To explain by way of example, let’s say that the average annual cost for nursing home care in Connecticut is $160,000. For the purposes of this hypothetical example, we will say that you gave away $320,000 during the five-year look-back. Since $320,000 would have paid for two years in a nursing home, your eligibility for Medicaid coverage would be delayed by two years.
During this two-year period, you would be forced to pay for your nursing home care out of your own pocket.
As you can see, it takes careful advance planning to qualify for Medicaid at the right time because of the 60 month look-back period. However, if you work with a licensed elder law attorney to put a plan in place, you can get the quality care that you need as you keep your assets in the family
Attend a Free Seminar
We are offering some great opportunities if you would like to obtain more detailed information about this subject and other matters that are of interest to seniors. Our firm is holding a number of free seminars during the coming weeks, and you can learn a great deal if you attend the session that fits into your schedule.
To get all the details, visit our seminar schedule page.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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