When it comes to paying for potential long-term care expenses, most clients fall into one of a few categories. Some decide to buy an insurance policy; others can’t afford the premiums; and a fortunate few have enough money to cover almost any related expense.
Another segment might have enough money to purchase long-term care insurance, yet not enough to self-insure. But instead of purchasing insurance, they hope to use complicated strategies to “keep” their money, yet still tap Medicaid to pay for needed care.
But those strategies may incur more costs than benefits. Instead, clients who want to have both their money and Medicaid may want to purchase a specific type of long-term care insurance known as a “partnership” policy, currently available to residents in 31 states. (Find out which states at www.tinyurl.com/ltcps.)
The policies allow holders to qualify for Medicaid assistance for long-term care costs, while still keeping assets equal to the amount paid for by the long-term care insurance policy.
For instance, if a client were to purchase a partnership policy that paid $3,000 per month for five years, and then required nursing home, assisted living, or other qualifying services, she could keep $180,000 of assets ($3,000 x 12 months x five years), and still receive Medicaid assistance after the policy payments would end.
Medicaid is a joint federal and state health care program that provides services for low-income individuals and families, and is administered by the states. One of the programs provided by Medicaid is the payment for long-term care services.
According to the Kaiser Family Foundation, in 2009 Medicaid provided about 43 percent of all money used to pay for nursing home, home health care, and other affiliated services. That figure was almost twice the amount that came from out-of-pocket funds and private insurance coverage—combined.
Qualifying for assistance from Medicaid depends on such factors as the patient’s state of residence, age, medical condition, and services required.
In regard to financial factors affecting eligibility, particulars can vary from one state to another. But generally those applying for long-term care coverage from Medicaid can have no more than a few thousand dollars in “countable” assets, such investments and real estate (other than a primary residence).
The restrictions on income from such sources as Social Security, pensions, interest, and dividends are a bit more lenient. Depending on the patient’s situation, she could receive anywhere from several hundred dollars per month up to a few thousand, and still qualify for Medicaid assistance.
The final major factor that determines Medicaid eligibility is the applicant’s marital status. The regulations allow married couples to retain a larger amount of income and assets before qualifying for Medicaid assistance for one of the spouses.
Aside from the partnership policy, there are other strategies for sheltering clients’ money.
Some clients may try to give their money to family members prior to applying for Medicaid to pay for long-term care costs, but there are several drawbacks to this idea.
First, there is currently a “look back” period that can be as long as five years prior to applying for Medicaid. The administrator will examine the applicant’s finances to see if any assets were given away during the previous years.
Any amount gifted will likely need to be applied toward future long-term care costs incurred by the patient, before any assistance is awarded. In addition, money transferred to another family member can be endangered by divorce, legal judgment, or just plain discretionary spending.
A Trust Is a Must?
Some clients may be able to qualify for Medicaid and still shelter assets by placing them in a special trust. However, the trust must be irrevocable, and the language creating the trust has to be very specific.
Even if the trust is properly crafted, any assets placed in the trust may still be subject to the look back period. And, by definition, the assets are out of control of the original owner—a price that many otherwise-healthy clients may not be willing to pay.
An Abnormal Annuity
Another vehicle that may help protect assets of a Medicaid applicant is a “Medicaid Compliant Annuity” (MCA). This is a special single-premium annuity purchased with assets owned by the spouse of a Medicaid applicant (also known as the “community spouse”).
In theory, converting liquid assets to an immediate annuity will reduce the asset amount to a level that will then qualify the couple for Medicaid assistance, yet still provide the healthy spouse of with an income stream.
But to qualify, the annuity has to have several restrictions. The scheduled annuitization can’t exceed the community spouse’s life expectancy, and the state Medicaid agency will get any funds remaining after the community spouse dies (until the amount paid by Medicaid is recovered).
Keep in mind that the annuity is irrevocable and non-transferable—meaning there’s no way for the spouse (or family members) to gain access to the original deposit amount.
You can look for more information on long-term care programs from the U.S. Department of Health and Human Services at www.longtermcare.gov; information about Medicaid is available at www.medicaid.gov.
If you and your clients don’t know an attorney who specializes in Medicaid planning, you can search for one at www.elderlawanswers.com. The site also has several helpful articles and calculators you can use to figure out how your clients can get the care and assistance they need, while keeping as much money as possible.