What is your plan to take care of your long-term care needs? Everyone has one. It may just be procrastination, but you just may need a better one. Now is the time to plan for how you’re going to pay for the expenses you’re facing unless you die very suddenly. You should realize that you, or someone close to you, may face a chronic condition requiring intensive care, either at home or in a nursing home. The funds to pay for these expenses are going to come from one or more of the following areas: private savings, investments (such as IRA’s), family members, long-term care insurance, or from some form of government assistance. According to the United States Health Care Financing Administration (HCFA), the agency of the federal government that oversees our country’s long-term health care industry, about 30% of all long-term care expenses are paid for by individuals or their families out of their own pocket. About 40% are paid by Medicaid, but there are a lot of strings attached to receiving this money (and will be covered more fully in another section), and the rest are paid for by Medicare and other sources.
Many people don’t take their long-term care plan more seriously because they mistakenly think they will be covered by Medicare, Medicare supplement insurance, by their own health insurance, or they just assume that one day the federal government will eventually cover them. According to the U.S. Agency on Aging, the number of elderly over 65 will increase every year for the next 50 years, and while it is true that as the “Baby Boomer” generation ages and becomes more politically powerful that there may be some type of universal long-term insurance, it does not currently exist. In our local tri-state area (TN, ARK, and MS), there is a growing movement to place more emphasis on home and community based services and away from the nursing home. They are exploring Medicaid waivers through certain trial programs in order to provide more services from a stretched budget, where the cost is lower than nursing home care, but so far they are very limited and there are no assurances that the budget crisis that many states are experiencing is even close to being resolved. While the trend is to provide more care in the home and at adult day care centers, the bottom line is that you just can’t depend on the government to provide for your long-term care needs.
Medicare primarily covers doctor fees, medical expenses, and hospital visits. There are a few instances where Medicare pays for long-term care, such as rehabilitation or specialty care after an acute care episode (such as breaking a hip), but they are very limited and restrictive and only for short periods of time. Medicare pays only when you have been hospitalized for at least three days, and the services have to be prescribed by a physician, and they have to be given in a skilled nursing facility approved by Medicare. Even then Medicare will only pay for 90 days.
As mentioned earlier, about 40% of long-term expenses are covered by Medicaid, but basically you have to spend down all of your income and assets to $2,000. There are some provisions for a spouse to keep some money above this level, but you really need to seek the advice of a qualified individual when it comes to these exceptions. Some people will tell you that you just need to purposely spend down your assets, but this takes a lot of planning, and you need to be real careful how you do this because it is technically illegal under the Health Insurance Accountability Act of 1996 to shelter your assets in order to qualify for Medicaid. It becomes especially tricky when you’re dealing with tangible assets, such as your house, because the federal government looks at assets sold under fair market value and can look back at an individual’s transactions for three years, and there have been instances where states have forced heirs to sell their parent’s house after their death to repay Medicaid. You can plan ahead legally through trusts and other legal instruments to protect your estate (which will covered more fully in another section), but you need good legal advice and proper planning in advance. Do not use any advice on this web site as any basis for any legal opinion.
Growing old is better in most cases than the alternative, so plan now to grow older and start planning for your long-term care needs.
