WHAT IS MEDICAID?
Medicaid is a program jointly administered by the Federal and State governments. At present, Medicaid is the only government program that provides substantial funding for long term care. Unfortunately, it does not begin paying for care until you exhaust your income and assets. After that, it still doesn't provide comprehensive coverage.
WHAT IS MEDICAID PLANNING?
Medicaid Planning, often one portion of the Life Care Plan is the process of positioning your income and assets to that you can legally qualify for Medicaid, while preserving as many resources as possible to supplement Medicaid or for other purposes. Medicaid Planning helps you secure long term care at the cheapest legal price.
Presentation on Medicare vs. Medicaid (requires Flash Player to view)
If you are over the age of 65 (or if someone you love is), then there is about a fifty percent (50%) chance that long term care will be necessary prior to death. That being the case, planning is important. Nursing home care is a fact of life that will likely affect every American either directly or indirectly. In addition to the personal issues such as displacement and the loss of independence, the stark reality of potential financial ruin looms large when facing an ongoing $4,000.00 to $6,000 per month bill for an average of 30 months.
Affording the high cost of long term care has plagued American families for decades. Spouses would divorce, assets would be plundered to nothing until finally the government would step in with some form of payment to keep the individual in care. Obviously, this was not a good solution to a very common problem. In order to reduce the burden on our senior population and keep them from impoverishing themselves so they could qualify for help, the federal law was finally changed in 1986. The law established new criteria to determine eligibility; it increased the amount of assets you can keep and still be eligible for assistance to pay for care. Many seniors still believe that the Medicaid program is welfare; quite simply it is not. It is merely the government's answer to a pressing social problem.
The law started out quite liberal in its application but ever since Congress created it, there has been a steady attempt to limit and reduce its effectiveness through changes to the law. One effect of these changes is we are now faced with a convoluted legal structure used to determine eligibility for Medicaid benefits. It's not as easy as "let me see your bank statement, okay, you are under the limits...you get benefits." Instead, there is a look-back period of five years, there are income caps, and income trusts to get around those caps, transfer penalties and waiting periods. Even an asset is not simply an asset; it is either countable or not countable.
Long term care, that is, nursing home care, is expensive averaging from $7,000.00 to $8,500.00 per month. More often than not the family does not have sufficient income to pay the on-going cost of care. This means that there is a steady and rapid depletion of the family's savings to meet the shortfall. This reduction in savings is increased when there is a spouse who is still trying to make it in the community. For example, a wife who has a spouse in a nursing home has that expense and still needs to continue to maintain her home and well being. The steady drain produces an obvious outcome: complete depletion of assets and insufficient income to maintain the spouse in the community, in addition to little or no inheritance to pass on to the children. Our role is to provide our clients with answers, with hope, and with real assistance. There are solutions.