Focusing on the needs of families and individuals as they age is an important aspect of estate and long-term care planning. With advances in age come advances in health problems. Along with health challenges, we face special legal challenges that need addressing. The body of law addressing these challenges is commonly known as “Elder Law.”
Long-Term Care Planning
Did you know that the U.S. has an aging population? It is expected that by the year 2060 the number of persons 65 years or older will more than double. On top of that, almost 70% of people turning age 65 will need long-term care. This means that in the year 2060, more than 68 million Americans over age 65 will be in need of long term care at some point in their lives.
With these numbers, the demand for long-term care will challenge the supply of organizations, facilities, and financial support available to meet this need. Many individuals and families face considerable financial hardship when family members end up needing a higher level of care at an assisted living facility or nursing home. And yet many people do not and will not want to face this issue until it is too late.
What about Medicare?
You may not know it, but once a person turns 65, they are eligible for Medicare. Medicare is the federal health insurance program divided into various “parts”. For example, Part A can help cover inpatient hospital stays or care in a skilled nursing facility, while Part B can help covers certain doctors’ services, medical supplies, and preventive services. This might sound like a great way to cover health issues as you age, but, unfortunately, this is not the case. Medicare only pays for some of the care you may need.
Medicare helps pay for acute nursing home care, but does not help pay for chronic care. An example of acute care is rehabilitation after hip surgery or another medical need where you will soon return home to take care of your own daily needs and health. Medicare is not designed to cover long-term care like nursing home expenses, or the kind of care needed for health concerns like dementia.
Medicare is not long-term care insurance. The longest Medicare may help cover care in a skilled nursing facility or hospice care is 100 days during a continuous period of care. Full coverage is limited to the first 20 days of care and copayments are a requirement thereafter. A Medigap (i.e., Medicare Supplement) policy will not pay for long-term care, but may pay the Medicare copayments for days 21 through 100. Any time spent in care beyond those 100 days will have no Medicare insurance coverage, and will need to be paid by the individual or family directly. This is even more important to note once the costs for long-term care are taken into consideration.
How much does long-term care cost?
According to the Administration on Aging, for the state of Washington, the average cost of a private room in a nursing home in 2012 was $8,000 per month. In year 2022, the predicted monthly cost jumps to more than $11,500. In year 2032, this number grows to more than $16,600 per month. That’s almost $240,000 per year!
What about Medicaid?
Medicaid is a jointly funded program by the federal government and your state. This means each state is allowed to approach Medicaid a little differently. Unlike Medicare, Medicaid is not based on your age, but it can help cover long-term care costs. To receive Medicaid, a lengthy application must be submitted, and reviewed by your state’s case worker.
For eligibility, a medical need and a financial need must be met. To be considered “medically needy”, a person must need assistance with two or more activities of daily living. Activities of daily living include things like bathing, eating, and mobility. To be considered “financially needy”, the person applying for care must have limited income and resources below $2,000 (as of 2016). Married couples with only one spouse in need of care are allowed more, but the rules are complex.
Since Medicaid is a government funded program, many people shy away from relying on it as a resource. However, it is important to note, Medicaid is not free. Many states participate in expanded estate recovery. This means that if a person received Medicaid during their lifetime, the state can become a creditor when they pass away. So, while there are government funded programs that can help with long-term care expenses, they often do not make it easy to pass certain property onto loved ones after death.
I have too many resources. What happens if I just give away all of my assets now?
It may seem like a good idea to start making gifts to family members to lower your resources, but this is not usually the case. Part of the Medicaid application process includes a 5-year lookback period. Any transfers of assets made for less than fair market value (i.e. a gift) within five years of applying for Medicaid will be examined by the case worker. For example, if you transferred your home to someone other than your spouse in the five years prior to your application, this may result in a period of time in which you are not eligible to receive Medicaid. This period is referred to as a penalty period. During this penalty period, you will be responsible to pay for your care and will have to re-apply for Medicaid once the penalty period is over. Before you consider giving your assets away, it is very important to discuss the consequences this may have with one of our experienced elder law attorneys.
The best advice is to plan ahead.
Fortunately, there are many ways families can plan for long-term care before the need arrives. This may include a long-term care insurance policy, but can also include other planning measures. Many of these planning measures should be taken at least 5 years before long-term care is expected to avoid the penalty period, but that’s not to say that there aren’t still planning options if you do not think you have five years to wait.
Our estate planning lawyers can present all the options available to you and your family now so that you can protect your assets better. This planning can help make the transition to long-term care easier for your family and will help make you more organized for the future. The sooner you take steps to plan for long-term care, the better position you and your family will have when long-term care is needed.