Throughout November, DIS encouraged brokers to remind clients to start a conversation with aging parents about planning for long-term care. If you hear that clients plan to use Medicaid to pay for long-term care needs, caution them that Medicaid may not be the panacea some are counting on. Below are some important points for your discussion.
#1: Asset exhaustion: Medicaid is intended to be the last resort for paying for long-term care, kicking in only after the recipient has spent the majority of his or her assets. To be eligible for Medicaid, recipients are restricted to maximum income and assets tests. Income and asset levels are determined by the state but must be within a range issued annually by the federal government. Encourage clients to contact their state Medicaid office or an attorney for a complete explanation of how the income and asset tests affect their situation.
#2: Five-year look-back: In anticipation of the income and asset limits, some people plan to gift assets to others to decrease the value of their estate. If an asset is gifted within 60 months of applying for Medicaid, eligibility will be delayed by the period of time the value of the asset could have paid for care. For instance, an asset of $50,000 was gifted to someone other than the spouse and the monthly cost of care is $2,500. That asset could have paid for 20 months of care ($50,000/$2,500). An eldercare attorney or accountant can explain the nuances and exceptions to the look-back rule.
#3: Estate recovery: The federal government requires states to recover from the estate of the deceased beneficiary some of what was paid for long-term care services. Nursing home, assisted living, home-health services and hospitalizations are generally recoverable. Recovery can be from the estate or from liens on property. For more information about Medicaid recovery, read How Medicare Recovers the Cost of Long-Term Care from Your Estate After You Die.
#4: Implications to the healthy spouse: Perhaps the most important consideration for those relying on Medicaid is the impact the decision has on the lifestyle of the healthy spouse. Medicaid allows the spouse to remain in the home shared by the couple and for the spouse to retain a percentage of the marital assets, subject to state minimums and maximums. The healthy spouse is subject to limited income and assets in order for the spouse requiring care to receive Medicaid benefits. If the healthy spouse requires long-term care, what assets remain to pay for care? If a skilled nursing facility is required, the choices available may be severely limited. Many facilities accept Medicaid only for established private-pay residents who exhaust their resources.
One way or another, no one is free from paying for long-term care. Relying on Medicaid takes the financial decisions out of the hands of the recipient and their spouse. If there are assets to protect, those considerations must be planned well in advance in order to avoid penalties.
When presented with realities, long-term care insurance may become a higher priority to your clients. DIS will help you structure an affordable policy that defrays at least some of the cost of long-term care. Call us today for a quote or to learn more about our DIS Sales Concierge Service. And if you haven’t, download our Conversation Starter to help your clients start the long-term care conversation.
