Managing Long-Term Care Costs

July 18, 2022Filed Under: Long Term Care, Medicaid Planning

Almost seventy percent of retirees in the United States will need some kind of long-term care (LTC), according to figures released by the US Department of Health and Human Services (HHS). According to research by Genworth, the median annual cost for these services will range from $53,768 to $105,850. HHS also reports that those who receive Medicaid-financed nursing home care will spend more time in residence than those who self-finance their care or have private long-term care insurance. These long-term care services and supports (LTSS) are becoming more critical as retirees live longer lives and worry about outspending their assets.

The Dilemma of Affording Long-term Care

Paying for long-term care planning remains a significant challenge for most older Americans and preparing for service payments can be tricky. LTC insurance may cover a portion of services or all of them, and premiums depend on a person’s age, gender, health, location, and other criteria. The American Association of Long-Term Care Insurance lists 2021 average premiums for initial benefits of $165,000 (with a 1 to 5 percent annual growth rate) for a healthy fifty-five-year-old male to be between $1,375 to $3,685 per year. For the same coverage type, a healthy fifty-five-year-old woman can expect to pay between $2,150 to $6,400. Premium hikes tend to be costly because metrics used years ago in the insurance industry were faulty and did not accurately project the real LTSS costs.

What is Hybrid Long-term Care Coverage?

A different payment option is hybrid long-term care coverage. These policies are part annuity or life insurance and part long-term care coverage. You may purchase a policy upfront eliminating any future risk of premium increases, and your heirs may receive a death benefit if you do not need long-term care. This option is an arbitrage approach hoping that you will not require LTSS and that your heirs may benefit. Hybrid policy price comparisons are more difficult to ascertain than a standalone long-term care coverage policy.

How to Utilize Health Savings Account to Pay for Long-term Care

A third option is for those retirees with sizable health savings accounts to use pre-tax funds to cover long-term care expenses or premiums. Currently, those itemizing deductions can write off long-term care expenses above 7.5 percent of their adjusted gross income on their taxes. Finally, those low-income retirees with assets below a certain threshold may qualify for Medicaid LTSS. Applicants must pass a five-year “look back” period to assure they did not gift or spend down assets to qualify.

Typically, family members play an important caregiver role for their loved ones who need help regarding activities of daily living. This statement is particularly true in the earlier stages of requiring care, where someone may need help with just one activity of daily living. In-home assistance, community programs, and residential facilities can help your loved one stay as active as possible, accomplishing everyday tasks. The family-style approach constitutes most living arrangements for those who receive long-term care.

HHS

Many available resources help older adults continue to reside in-home and participate in their communities. The stay-at-home option in the earlier stages of a significant long-term need, or if projected care requirements may be a matter of two to three months, may be the most viable and cost-effective solution. Pivoting to in-home service provision is the most likely scenario for most American retirees. Nursing home residential space is expensive, and Medicaid can only supply so much aid. While most LTSS stays remain paid care and have relatively short durations, the lifetime risk for expensive out-of-pocket costs runs high.

Unfortunately, receiving paid LTSS care is not equally distributed among the US population. Generally, people with limited education and less financial resources are the most likely to experience severe LTSS needs. Over a lifetime, however, the more well-educated population with different socioeconomic advantages tend to live longer and can outlive their assets. Family is an integral part of the solution for long-term care while the federal government responds to the growing need to make this care more available and affordable. For your best outcome, be proactive in your planning. Most Americans will need LTSS, but few will have taken steps to plan for it. We hope you found this article helpful. If you’d like to discuss your particular situation, please don’t hesitate to reach out. Please contact our Cincinnati office by calling us at 513-771-2444 with any questions.

Medicaid: Five Years of Looking Back Without Penalties

June 6, 2022Filed Under: Elder Law, Long Term Care, Medicaid Planning

Planning for long-term care is important because nearly everyone will require it at some point in their lives. While we cannot predict the timing or level of care, we can take steps to prepare for an unexpected medical and financial crisis to help reduce the stress on ourselves and our family members. The cost of care continues to rise, but Medicaid planning can protect your assets, such as your home, hard-earned savings, retirement fund, or anything you wish to pass on to your loved ones.

Medicare is a federal and state program that helps seniors with limited assets and income afford long-term healthcare. Many seniors believe their only option to qualify for the program is to “spend down” their assets. However, proactive Medicaid planning can protect a substantial portion of your estate if done correctly. That means preparing at least five years before the potential need for benefits. The program’s eligibility rules are complicated, as is the application process. That’s why many people choose to hire an elder law attorney who specializes in Medicaid planning to evaluate their estate and reorganize assets over time.

Medicaid qualification requires a five-year look-back period at financial transactions in most states. The program verifies income and makes sure you haven’t gifted property to others under fair market value to reduce countable assets. Gifting assets is subject to a penalty that results in a period of ineligibility for benefits. The rules for gifting change state by state, and it’s important to know the rules where you live. If you begin early, you can ensure qualification for benefits when you really need them.

Qualifying for Medicaid Without a Penalty

A combination of options gives you the best outcome when applying for Medicaid benefits. An elder law attorney can customize a Medicaid planning strategy that works for your specific needs and goals. When you find yourself in need of long-term care services, you can receive Medicaid benefits to offset costs ranging anywhere from $60,000 to $100,000 a year.

The rising costs of long-term care can be overwhelming and unaffordable, depending on an individual’s needs. Your Medicare policy doesn’t cover long-term in-home or nursing facility services, and long-term care insurance premiums are very high. To discover more options, you’ll need a list of countable assets to determine ways to spend down that comply with Medicaid rules. It makes sense to spend down if it offers advantages:

Make home modifications like stairlifts, wheelchair ramps, walk-in showers, and other convenient amenities
Purchase a funeral benefits plan to cover final expenses
Pay off debt
Gift assets at fair market value with legal documentation
Create caregiver agreements to compensate for care

Caregiver Agreements are formal agreements to compensate caregivers who can be relatives or friends, but they need to be carefully drafted by a professional.

Qualified Income Trust

You may still have too many assets to qualify for Medicaid benefits, but those assets can be protected from Medicaid’s Estate Recovery Program. Your elder law attorney may recommend transferring them to a trust called a Qualified Income Trust (QIT) or Miller Trust. It is an irrevocable trust managed by a trustee who has legal control of the funds. Once they are transferred, they are no longer countable assets.

Medicaid Exempt Annuities

This life insurance annuity type is common to avoid Medicaid penalties during the look-back period. An annuity is a lump sum investment by an individual in return for a monthly payment for the duration of that person’s life or a set number of years. These annuities turn assets into income, lowering the countable assets of the Medicaid candidate below the eligibility limit. However, not all annuities qualify, and your attorney will help you choose the right product.

The surest way to avoid violating a look-back period when qualifying for Medicaid is to consult a qualified Medicaid planning and elder law attorney before you gift or transfer any assets. If a violation has already occurred, they can also offer assistance to correct a problem.

Always seek professional legal advice when creating your long-term care strategy using Medicaid. Applications are rarely successful due to mistakes when filling out forms, and it can have devastating long-term consequences on a family and their finances. Begin well before you anticipate needing long-term care. Become well-informed about all your options as you go through the application process. Proactive planning and expert legal strategies can help protect your assets and offer considerable help for your long-term care costs. We hope you found this article helpful. If you’d like to discuss your particular situation, please don’t hesitate to reach out. Please contact our Cincinnati office by calling us at 513-771-2444 with any questions.

2022: Long-Term Care Options

April 11, 2022Filed Under: Elder Law, Long Term Care, Medicaid Planning

At the beginning of a new year, we all take stock in our lives and make health care plans. Americans continue responding to the ever-present threat of COVID-19 in its many iterations, and we are identifying that which is most important in our lives to preserve our health and financial future best.

For many, the mere mention of long-term care health insurance congers up images of twilight years seemingly far removed from our daily lives. However, the reality is that you may find yourself in need of long-term care due to a sudden disease or illness or as the result of an accident. The US Department of Health and Human Services statistics currently show that about seventy percent of individuals over the age of 65 will require some long-term care during their lives. Genworth’s latest statistics show that a full thirty-seven percent of these long-term care recipients are, in fact, under sixty-five years of age.

Regardless of your age or cause, when long-term care becomes a requirement, it is important to know and plan for your options regarding funding the care you need, where and how you prefer to receive it. Your planning today can make a huge difference in your financial solvency and those caregivers (mostly family) who participate in the financial burden of your care.

Naturally, the best scenario is having prepared for the future by having healthy balances saved in your retirement programs and health savings accounts. If the funding is available to cover long-term care costs for yourself or a loved one, it is prudent to do so. Perhaps you can only make part of the funding happen, in which case you may have to ask loved ones for help. They may have the financial where with all to finish covering premium costs. Paying some out-of-pocket for an aging parent early on means less of a toll emotionally, physically, and financially, should a family member have to assume becoming a full-time caregiver.

The IRS considers long-term care insurance as a medical expense. As long as the policy is qualified, it is deductible. IRS rules state the policy must have been issued on or before January 1, 1997, and adhere to certain requirements. Policies purchased before this date may qualify to become grandfathered if the state’s insurance commissioner approves the selling of the policy. The IRS rules from 2021 to 2022 are little changed, most notably in age categories from sixty to seventy years old the IRS reduced the deduction by ten dollars.

Note these tax deductions are, for the most part, not available in hybrid policies. These policies combine life insurance and annuity policies with a long-term care benefit. Hybrid policies are becoming particularly popular because if long-term care is not a requirement, the individual’s heirs may receive a death benefit. Your medical expenses need not exceed a certain percentage of your income to be tax-deductible. As long as you earn a profit, you may take the amount of your long-term care insurance as a deductible.

Public programs are becoming more heavily leveraged for lower-income individuals to plan for long-term care services. There is nothing wrong with taking advantage of these programs; however, most Americans do not understand the differences between Medicare and Medicaid, what and who they fund, and for how long. The answers are complex as there are physical and financial thresholds to qualify for benefits, and these may vary from state to state. Here is a general overview of qualifications and limitations in coverage and choices of care facilities.

Sometimes referred to as Medicaid crisis planning, an elder law attorney can guide you through the process of sheltering some of your assets. Medicaid is a federal/state program helping low-income seniors with limited income and assets afford healthcare and long-term care. Many seniors believe their only option to qualify for the program is to “spend down” their assets. While this is true in some cases, proactive Medicaid planning can protect a substantial portion of your assets if done correctly.

The program’s eligibility rules are complicated, as is the application process, so it is best to navigate the process with a specialized Medicaid planning elder law attorney well before you need to tap the benefits. Always seek professional legal advice when creating your long-term care strategy using Medicaid. Applications are rarely successful as a do-it-yourself project, and mistakes can have devastating long-term consequences on a family and their finances.

Options for long-term care exist; however, finding the best solution for your financial circumstances is complex. As 2022 is upon us, it behooves us all to look to the future of our healthcare and prioritize proactive planning, ensuring there will be a plan in place when we encounter the likelihood of a long-term care requirement. We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact us at 513-771-2444.

You Must Plan in Advance for Your Spouse’s Future Care

September 27, 2021Filed Under: Medicaid Planning

At some point in your life, there may come a time when you realize you can no longer take care of your spouse at home. At this emotionally difficult time, the last thing you need is the stress of not knowing where to find the money to pay for the steep costs of institutional care.

Advance planning is a must. As as soon as you can – ideally, at least five years before serious health problems arise – take advantage of many elder attorneys’ willingness to talk with you for free, or for a modest initial consultation charge.

We are here to help you navigate the complexities of the Medicaid program. This is a governmental fund available to meet the staggering expense of institutional care, but the ins and outs of the qualification rules are complicated and mistakes can be costly. Here’s a thumbnail to help you grasp what your attorney will be telling you.

“Resources” and “Income”: The Difference

Medicaid assistance is available only to those who own very little. The Medicaid rules determine what “owning very little” actually means. A person can only own around $2,000.00 of what Medicaid calls “resources.”

Resources include cash in the bank, CDs, the cash value of insurance policies, investments, and the like. Income includes regular paychecks, Social Security, or payments received for child support. Both income and resources are potentially “counted” by Medicaid as “available.” To qualify for assistance, available income and resources must be carefully spent or transferred away.

Exempt Resources

Some resources are not counted or, in other words, are exempt. This means the Medicaid rules exclude them from adding up to the $2,000.00 limit. These resources are sheltered from Medicaid’s requirement that the applicant must spend down almost everything before assistance will be available.

A married couple’s residence, one motor vehicle, household goods and furnishings, medical equipment, jewelry, and other items are exempt. This means that an ill spouse can still qualify for Medicaid assistance even if the couple owns those resources. There’s no need to give them away or sell them to qualify.

The distinction between “exempt” and “non-exempt” assets can be tricky, though, and should first be assessed by a qualified elder-law attorney before any action is taken.

What the Well Spouse Can Keep

The Medicaid rules permit a spouse who remains at home to keep a portion of the couple’s resources. This is known as the “community spouse resource allowance” (CSRA). Of course, you’d like to see the well spouse keep as much as possible within the CSRA limits. Planning can arrange the distribution of resources to make that happen.

Here is where the difference matters between “resources” and “income.” Medicaid distinguishes between the well spouse’s income and the couple’s resources. Resources over the CSRA limit must be spent down or carefully transferred. As to income, the well spouse can keep it up to a certain level, so he or she will have enough money to live on. The Medicaid rules call this the “monthly maintenance needs allowance” (MMNA).

For example, if the well spouse gets Social Security benefits of only $500.00 a month, but her allowed MMNA is as high as $2,000.00, it makes sense to convert some of the couple’s resources into raising her income up to the MMNA limit. This is not a simple matter, though, and should be done only on the advice of a qualified elder-law attorney.

Planning for Medicaid eligibility can be complicated. Please consult an elder-law attorney as soon as possible. The sooner you plan, the more strategies are available to protect your resources. An initial consultation with a qualified elder-law attorney, for free or for a modest amount, could save you many thousands of dollars.

Don’t delay. If you’d like to discuss your particular situation, please don’t hesitate to reach out. Please contact our Cincinnati office by calling us at 513-771-2444 with any questions.