By Diana Frier
The decision to place a loved one in a nursing home is difficult and emotional—add in financial worries and it becomes a pressure cooker of stress. Many people think that everyone entering a nursing home automatically loses all their money. That is not true, in fact, by taking the proper steps, as much as 50% of assets can be protected. Planning ahead can alleviate some stress from the process and eliminate surprises.
For example, let’s say that your father needs nursing home care. After doing your homework to find the nursing home that will be the best fit, see their admissions coordinator to fill out the necessary paperwork. Dad will have to sign the paperwork unless he has a Durable Power of Attorney. You will need medical records from his doctor or from the hospital if he had a recent stay. A team will review the paperwork, and when a decision is reached, the admission coordinator will contact you (or the hospital if Dad is hospitalized) to arrange for an admission date.
How will the bill be paid? Many people are under the misconception that Medicare pays for ongoing nursing home costs. Medicare only pays for nursing home care, when admitted within 30 days of a qualifying hospitalization of at least three consecutive nights. Then, Medicare pays 100% of nursing home costs for 20 days. Beginning on the 21st day, Medicare pays the costs, minus a co-pay of $170.50 per day for an additional 80 days (for a total of only 100 days) as long as a skilled level of care is maintained, as determined by Medicare.
Medicaid pays for long-term care for those that do not have the resources to pay for their own care. It is important to note that Medicaid is a federally funded program, but it is mandated by each state. Therefore, the rules differ from state to state and change often. (Medicaid details given in this article are for the State of Florida) Apply for Medicaid immediately, even if your father has too many assets currently. In the State of Florida, the current Medicaid rules state that to qualify for Medicaid an individual can have no more than $2,313 in gross monthly income, $2,000 in assets, a home, a car and $2,500 earmarked in the bank for funeral expenses. If an individuals’ gross monthly income is $815 or less, their asset limit is $5,000 instead of $2,000. Be aware that a life insurance policy with cash value counts as an asset that will have to be cashed in or assigned to a Funeral Home in order to qualify; however, Annuities and IRAs do not count as an asset, they only count as income.
If Dad’s income is more than $2,022, he will need a Qualified Medicaid Income Trust (QIT). With a QIT, his gross income goes into the trust. The Department of Children and Families (DCF) looks at his expenses and determines the amount the nursing home will receive for Dad’s care and that amount is paid from the trust. If Dad qualifies for Medicaid, it will pay his nursing home expenses. He will also receive $130 a month for personal needs and the amount of his Medicare supplement premium will be excluded from his patient responsibility.
If your mother is living independently, her income is considered when figuring Dad’s Medicaid benefit. It is used only to determine if Mom will receive part of Dad’s income after he is admitted to the nursing home. The spouse is allowed $126,420 in assets, not including the home or car.
One of the biggest mistakes people make when they know they may be needing nursing home care is transferring money or property to their children, thinking that it will not count against them when they apply for Medicaid. Medicaid currently looks back 5 years. If Dad transferred assets to anyone other than Mom (including a church or charity) in the last 5 years, he will have a period of disqualification from Medicaid. A penalty will also result if he has sold goods for less than their market value. There are ways he can spend down assets that Medicaid will not penalize. These typically include earmarking up to $2,500 for funeral expenses and purchasing an irrevocable prepaid burial. Medicaid does not frown upon the spouse spending money for their own wellbeing, including purchasing a new car or home improvements.
What about Long Term Care (LTC) Insurance? LTC insurance is a great benefit for those that know they have too many assets to qualify for Medicaid. It pays for their care, thereby protecting their assets. It also helps those who need time to get their assets in order before they can qualify for Medicaid. Long-term care insurance has changed dramatically in recent years, and more changes are coming, so talk to an expert about the details.
Statistics say that at least 70% of people over the age of 65 will require long-term care at some point. Planning is important to ensure that first, senior adults get the care they need and second, that their assets are protected. The rules change frequently, so it is important to stay informed. See an attorney that specializes in elder law to get the best advice for you and your loved ones.
*This article is for information purposes only and should not be construed as specific financial or legal advice. Please consult an attorney or financial advisor to receive advice specific to your situation.