Paying for Long-Term Care

One of the common misconceptions about estate planning is that it only matters once the person who did the planning has died. It’s understandable, what with the word “estate” in there, but estate plans can definitely affect you while you’re still alive. In the past, we’ve talked about planning for incapacity, but another issue is dealing with the costs of long-term care. According to the U.S. Department of Health and Human Services, 70% of those people who reach age 65 will need long-term care at some point.

Hold on, what do you mean by “long-term care?”

As we age, our ability to handle daily living activities can decrease. This is especially so if illnesses, injuries, or disabilities take their toll on our bodies. Long-term care is mostly about helping people handle the basic, daily activities of life, like eating, bathing, using the restroom, or moving around the home.

Often, we associate long-term care with nursing homes, but that’s not always necessarily the case. Services can also be provided by adult day care centers, home health services, assisted living facilities, and other similar arrangements.

Does Medicare pay for long-term care?

Generally, no. Medicare is medical insurance, primarily for people over age 65. Medicare (specifically, Medicare Part A) covers in-patient treatment in hospitals, skilled nursing care in a skilled nursing facility, some home health services, and hospice care. However, if you’re not getting skilled care, Medicare doesn’t cover it.

You might also have supplemental health insurance that fits along with Medicare, but it might not be helpful. If it’s medical insurance, it probably won’t cover long-term care. If you’ve got supplemental health insurance, check the policy and see what’s covered.

So what are the options, then?

Essentially, there are 3 options:

  1. Pay for care yourself. If you can afford this, great! For a lot of us, this is probably beyond our financial ability. Even if it isn’t, if you’re interested in leaving assets to your family and causes you care about, paying for your long-term care will reduce what you can pass on.
  2. Purchase long-term care insurance. Like any costly thing that may or may not happen, you can insure against the possibility that you will need long-term care. Long-term care insurance is not for everyone; the older and less healthy you are, the more expensive (or possibly unavailable) the insurance will be.
  3. Have the government pay for it. Medicaid (which is administered under different names by the states–it’s MO HealthNet in Missouri) will pay for long-term care, but only if you qualify.

Usually, I get questions about that third option. MO HealthNet targets a few different types of populations, but for our purposes here, we’re going to focus on folks over 65. In order to qualify for MO HealthNet coverage, you must:

  • live in Missouri and intend to remain here
  • be a U.S. citizen (or a qualified non-citizen)
  • owns non-exempt assets of less than $1,000 (single) or $2,000 (married couple) (this is changing–more on that in a moment)
  • has net income less than $834/month (single) or $1,129/month (married couple)
  • not be a resident of a public, private, or endowed institution (except a public hospital)

Asset limits

In the list of qualifications above, one of the criteria was about having “non-exempt assets.” As you probably figured out, that means some assets are exempt. What’s exempt from that limit?

  • Your home, as long as it is the primary residence of you, your spouse, or a dependent child
  • 1 automobile
  • Life insurance policies of low value
  • Pre-paid burial plans or plots
  • Personal and household property–clothing, furniture, that sort of thing
  • Business property that produces income

Most other assets are going to be “non-exempt,” which is where the limits kick in. Right now, those limits are $1,000 for individuals and $2,000 for married couples. However, that’s changing, beginning in 2018:

  • 2018: $2,000 individual, $4,000 married
  • 2019: $3,000 individual, $6,000 married
  • 2020: $4,000 individual, $8,000 married
  • 2021: $5,000 individual, $10,000 married

After 2021, the limits will be adjusted (to the nearest 5 cents!) by cost-of-living adjustments determined by the Consumer Price Index for All Urban Consumers.

One other rule is relevant here: the 5-year “look-back” period. In order to get under the limits, some people were essentially giving away their property and applying for benefits. Because of that, any transfers of property for less than fair market value within 5 years of applying for benefits causes the transferred property to be counted in the applicant’s assets.

The “Spend Down”

The other feature of the qualifications worth some explanation are the income limits. If you exceed those limits, but otherwise qualify, you may be able to get help from MO HealthNet, but you’ll have to spend some of your own money first. This is known as the “spend down.” The income limits change from year to year, because they’re based on federal poverty level.

How Assistance Affects Your Estate

If you receive assistance from MO HealthNet, that’s going to affect the beneficiaries of your estate. That’s because MO HealthNet will attempt to recover the amount of assistance from the estate of the person who got the assistance. Missouri law requires that no estate can be closed without MO HealthNet releasing the claim. As a practical matter, courts in this area require the release as part of opening the estate in the first place.

If you’re doing estate planning, these issues are worth considering. There’s not one right answer here: it really depends on your age, health, finances, and assets, among other things. We’ve talked before about how estate planning in general is not a “do-it-yourself” project, and this type of planning definitely isn’t. Doing this incorrectly can make your long-term care more difficult and burdensome, and can be expensive for you, your family, and your beneficiaries.

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