When you are planning for retirement, you should be aware of what you can expect from the Medicare program. Medicare is a government health insurance program that is intended to provide coverage for senior citizens.
You gain eligibility for Medicare coverage by accumulating retirement credits while you are working and paying taxes. At the time of this writing in 2014, you get one credit for every $1200 that you earn. The maximum annual accrual is four credits.
Once you have accumulated 40 credits, you will qualify for Medicare coverage when you reach the age of 65 under currently existing laws.
Medicare will certainly be of great assistance if you qualify, but there are limitations. There are significant out-of-pocket expenses that you should prepare for in advance.
There is a deductible for inpatient hospital stays, and there can be co-payments for long stays.
You have to pay a monthly premium for Medicare Part B coverage. This is the portion of the program that pays for visits to physicians and outpatient care.
There is also a premium that you must pay for Medicare Part D, which is the prescription drug portion of the program.
In addition to these out-of-pocket expenses, there is a very big gap in the coverage: Medicare does not pay for long-term care.
If you need help with your activities of daily living, this is considered to be custodial care rather than medical care or convalescent care. Medicare will not assist with custodial care costs.
Long-term care is very expensive, and most people will eventually need help with their day-to-day activities. In the state of Connecticut, the average annual cost for a year in a nursing home exceeds $100,000. People often spend multiple years in these facilities.
Medicaid Planning
Medicaid is a government health insurance program that will pay for long-term care. However, it is only available to people who can demonstrate significant financial need.
Many people who were never financially needy ultimately seek Medicaid eligibility late in their lives. This can be accomplished through a process called a spend down. When you spend down, you spend or give away assets before you apply for Medicaid coverage.
This is easier said than done, because there is a five-year look-back. You are penalized and your eligibility is delayed if you give away assets within five years of applying. As a result, you must plan ahead carefully if you want to gain eligibility at the ideal time.
Free Medicaid Planning Report
If you would like to obtain some in-depth information about Medicaid planning, download our special report. This report is being offered free of charge, and you can access your copy through this link: Hartford CT Medicaid Planning.
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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