No one likes to think about residing in a nursing home in their final years.   It is also extremely difficult to anticipate the cost of what that will be at the time you may need that level of care.  At the current time, the national average annual nursing home cost is ~$55,800. Florida’s average is below this at $54,000. Very few seniors in their 80’s today ever anticipated spending this kind of money for their care in later years. It is particularly alarming when it may be both partners facing this type of cost for care. A couple with a life savings of $250,000 may find themselves penniless in ~ 2 years if both require nursing home care.

Medicaid is a primarily state funded impoverishment program. There are actually several programs that fall under this hat. The Institutional Care Program is one of these  Medicaid program that provides funding for eligible recipients that require the skills of a nursing home for care.   There are basically 3 eligibility requirements for this program:

1. The applicant’s income cannot exceed $1656 per month.
2. The applicant’s countable assets cannot exceed $2000 per month. The community spouse’s assets cannot exceed $90,660.
3. The applicant must require the skills of a nursing home level of care.

If an applicant’s financial resources don’t line up exactly to the eligibility requirements, the applicant will be denied Medicaid benefits. The Department of Children and Families (the entity that reviews the applications)  is not set up to counsel applicants on what they need to do to become eligible. They will simply review  the presented paperwork and determine if the eligibility requirements have been met. For many unknowing applicants, this is where it ends.

What many people are unaware of, is a process called Medicaid planning. In this process, a client’s financial resources and how they are set  up are reviewed by a professional trained in Medicaid law. Prior to applying for Medicaid, the client’s and / or their families are counseled on how  to arrange their finances to enable them to become eligible for the program. For some applicants, this is simply a process of transferring countable assets over to a spouse. For others, the process may involve “spending down” or perhaps even gifting assets to a trusted family member or charity. Medicaid program law  recognizes that the program does not cover everything a client may need. It has provisions built within it to allow applicants ways in which to preserve assets legally to cover those items that are not covered under it’s plan. The provisions are very specific, and applicants will need professional assistance to ensure that they have followed the rules precisely. Also, the applicant and their spouse have to weigh the ramifications of going through the  process against the benefits of the program.

For example, a couple that has $250,000 in life savings suddenly discovers that the wife with Alzheimer’s is going to need nursing home placement. Even if the wife’s income is below the limit, and she meets the level of care requirements, $250,000 is clearly over the spousal resource allowance limit. There are Medicaid planning strategies that can deal with this “overage”. One strategy may be to pay off bills or outstanding credit card debt. If there is a mortgage on the house, it may be that the best option would be to pay the mortgage off with the “overage”. The asset could also be converted to an income stream to the community spouse. Which option is best would depend on the individual situation and the tax implications of each option.    Since the potential savings would be about $50,000 per year, there is an obvious benefit to the planning process for this couple.

There are many who question the ethics of becoming qualified for Medicaid in this matter. The truth is that, even though the Medicaid Institutional Care Program is very generous at the current time in what it covers, it still doesn’t cover everything.  Recipient’s of the benefit must pay all or most of their income to the nursing home - keeping only $35 per month for personal needs (Medicaid picks up the rest of the bill). $35 barely pays for a monthly haircut - much less TV cable or phone connection costs - items not covered under Medicaid. The program eligibility requirements make the assumption that once a client enters a nursing home, they are going to reside there for the rest of their lives. It does not account for clients who get better and are able to move back home or to an assisted living facility. If these clients have not done any Medicaid planning to preserve some of their assets, there won’t be any money to fund an alternative living arrangement when that time comes.

Something else to consider are  the needs of the community spouse.   The $90,660 spouse resource allowance sounds like a lot of money. It may even be adequate if that spouse is able to live in a completely paid for home. If that spouse should need to move into an assisted living arrangement, however, $90,660 will last about 3 years. What if that community spouse needs assisted living for longer than 3 years?  What if the nursing home spouse improves and is able to join the community spouse in assisted living?  How does $90,000 last then?  The Florida Assisted Living Medicaid Waiver program offers only very limited options for assisted living arrangements and tends to be woefully under funded for the waiting list of people trying to access these funds.   Many of Florida’s seniors are finding themselves in this very frustrating financial bind.

Medicaid planning can assist with stretching those hard earned life savings to last as long as possible.   Preservation of assets with the intent of increasing the inheritance to children and grandchildren (while the state picks up the long term care bill) is wholly unethical and inappropriate. Preservation of assets with the intent to preserve future quality of life for the couple who worked all their lives for the money is completely appropriate and is, in fact, provided for within the Medicaid program law. Professional help should be utilized to ensure that the law is followed precisely.

Those baby boomers approaching their retirement years would be wise to consider long term care insurance as a part of their estate planning. Medicaid is a state funded program and no one can predict what the future will hold for the benefits under that funding source. It is also very difficult to predict what the costs of care will be 20 years from now........ best to plan ahead!!!!

For more information on Medicaid planning and filing assistance, contact:

Elder Advocates Incorporated | 407.898.9080 | www.elderadv.com