By Myka Landry
Not everyone will need long-term care as they age and encounter increasing health problems, but it is something that smart individuals think about and plan for before it is too late.
Some people purchase long-term care insurance, but it can be expensive and cost-prohibitive. Others may put aside money each month to cover their future health-care expenses. For many who are unable to do either of those options, another alternative is Medicaid.
But Medicaid’s long-term care assistance comes with many rules and restrictions. Medicaid looks at three areas – income, assets and medical need – before accepting someone into its long-term care program.
To qualify, you can only have the amount and type of assets approved by Medicaid. If you try to give away assets to protect them from Medicaid, there is a five-year look-back period. If you have given away assets in the five years prior to applying for Medicaid, you will be subject to penalties.
You have to be careful when trying to determine for yourself what are assets, income and gifts. What Medicaid thinks are assets and gifts may not be what you think are assets and gifts. For example, under the tax law, you can give away $15,000 per year per person without a tax consequence. For Medicaid purposes, however, it will be considered a gift and you can be penalized.
Also, if you sell an asset for lower than fair market value, the difference is likely to be considered a gift from a Medicaid standpoint. Finally, many people consider IRAs and annuities as income. Under Colorado Medicaid law, they are an asset.
Medicaid planning is not simple, and there is a lot of misinformation out there.
To make it even more difficult, Medicaid laws are different in every state. So you can’t talk to friends in Florida and plan the same way they did. What works in Florida may not be allowed in Colorado.
The point is you need to plan. Even if you worked hard all your life, have a good retirement and can live comfortably, you might not be able to afford long-term care without some sort of assistance.
Long-term care can be quite expensive. According to a 2017 Genworth Financial Cost of Care Survey, the national average for a semi-private room in a nursing home is $85,775 a year. For an assisted living facility, that national average is $45,000 a year.
So while Medicaid is usually not the goal, there are times when it is the only alternative even if you have saved for a comfortable retirement.
I recommend meeting with an estate attorney who is knowledgeable about Medicaid and long-term care, as well as a qualified long-term care insurance broker. With a full evaluation of your situation and the assistance of professionals, you can at least have a plan in place in case you need long-term care in the future.
This is intended as a general introduction to the topic of Medicaid and long-term care and does not constitute legal advice, nor does it create an attorney-client relationship. Always speak with qualified professionals about your specific situation before taking any action.