One of the greatest concerns of seniors and their families is the cost of long-term care, especially the cost of nursing home care. Long-term care refers to a range of services necessary to meet your personal needs. Most long-term care is not medical care, but assistance with the basic tasks of everyday life, commonly referred to as activities of daily living. These include bathing, grooming, dressing, eating and ambulating. This type of assistance is generally known as custodial care.
Most of us hope that we will never require long-term care. However, according to the U.S. Department of Health and Human Services, someone turning 65 today will have an almost 70% chance of needing some form of long-term care services during the course of their remaining lifetime. The need for such care can have a devastating effect on a family’s finances. The costs can range from $7,000- $10,000 per month. A year in a nursing home can easily top $100,000.00.
Many are unaware that Medicare does not cover most long-term care services. Medicare only pays for nursing home costs in certain circumstances. If you are hospitalized and discharged to a nursing facility for rehabilitation services, Medicare will cover up to 100 days of the rehabilitation stay.
The first 20 days are paid completely by Medicare. Days 21 through 100 require a co-pay of $194.50 per day. However, in order to qualify for Medicare rehabilitation coverage, a person must be hospitalized for three days prior to entering the nursing home. In addition, Medicare coverage will only apply if you require skilled nursing services at the facility. Medicare does not provide coverage for custodial care.
Medicaid is a joint program of the federal and state governments that will cover the long-term care costs of those who have little or no money. Medicaid currently covers more than 60% of all nursing home residents. However, most seniors must first spend all of their money paying for their care before they can qualify for Medicaid. Medicaid’s financial standards are strict. A single person may own assets worth no more than $2,000. If a Medicaid applicant is married, their spouse may keep one-half of the couple’s assets, up to a maximum of $137,400.
Many seniors attempt to qualify for Medicaid by gifting a sizable portion of their assets to their children. This is not an advisable strategy because a penalty will be imposed on an applicant who has made any gifts in the five years prior to applying for Medicaid. The penalty is determined by totaling the value of the gifts given within the five-year period and dividing by an amount established by the State (in Ohio the amount is currently $6,905).
A person who has given $69,050 to their children prior to applying for Medicaid will be subject to a penalty period of 10 months. Thus, even though the applicant is otherwise financially eligible for Medicaid, they must pay for their own care for 10 months after their application has been approved.
With proper legal planning, it is possible for a person to preserve a significant amount of assets for their family and still qualify for Medicaid. Timing is essential when planning for long-term care. The sooner you begin the planning process, the more you will be able to preserve for your family.
Joseph L. Motta, LPA is an estate planning and elder law attorney with an office in Avon Lake. You can reach him at josephlmotta.com or 440-930-2826.
