Medicaid may pay for long-term care if you meet its vehicle test restrictions. The federal-state program is designed to help only those with limited financial means. However, those with more substantial assets can use three different strategies to protect those assets from Medicaid and ensure they qualify for long-term care benefits. For help with long-term care planning, consider talking to a Financial Advisor.
What is long-term care?
First of all, what is long-term care? The term covers a wide range of services needed for people who are unable to perform daily tasks due to a debilitating health condition or disability. Long-term care is different from traditional health care such as doctor visits and medication, so it is not covered by health insurance.
Instead, this type of care usually includes care services like helping people shower, use the bathroom, eat, etc. Long-term care can refer to any facility and service. The following:
How to pay for long-term care
Paying for long-term care can be a significant financial challenge. For example, the average annual bill for a semi-private room in one nursing home is $94,900, according to Genworth care cost survey 2021.
There are four ways to pay for long-term care:
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Pay for it with your own property
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Buy long-term care insurance
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Medicare (in some cases)
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Medical allowance
Paying for skilled nursing home care with your own personal assets can deplete even a sizable fortune quickly, so many planners look for other ways. If purchased in advance and premiums are paid regularly, long-term care insurance may cover some or all of the costs of long-term care. Health Insurancefederal old-age health insurance program that can pay for up to 100 days in a nursing home or rehabilitation care, but basic Medicare is not set up to pay for long-term care .
Those leaves Medical allowance, a federal state program designed to help elderly or disabled people with limited financial capacity pay for health care and other services, including long-term care term. In many states, Medicaid can indefinitely cover the cost of living in a skilled nursing facility.
However, to receive benefits, you must meet Request a Medicaid vehicle inspection. These vary from state to state but generally require recipients to have assets of no more than $2,000 and income no more than twice the federal poverty level. Anyone with larger assets may not be eligible for benefits or may face fines and other penalties if they break any of the eligibility rules.
But one way people with more resources can qualify for Medicaid assistance is to “spend” their assets. – pay for care with their own money until their assets and income are reduced enough to meet the program’s requirements.
Another tactic is to donate assets to someone else, such as a family member, so that a patient receiving long-term care can pass an affordability test. However, Medicaid has a provide a look back five years requires that any property transfer be completed at least five years before applying for Medicaid assistance.
For more recent transfers, Medicaid imposes a penalty. This is calculated by dividing the size of the asset transfer by the local monthly nursing home care costs. Transferring $200,000 in an area with a monthly cost of $10,000 would require the patient to pay out-of-pocket for their care for 20 months.
How to protect assets from Medicaid
There are other ways to protect assets from Medicaid while still receiving long-term care benefits. These may involve costs of their own, and all have some limitations to consider, but they may be better suited to a spending reduction strategy:
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Medicaid Asset Protection Trust. By setting up an irrevocable trust and transferring into it any assets that exceed the financial limits of Medicaid, you can effectively protect those assets from penalties and other plan penalties. submit. One problem here is that assets cannot be transferred back from the trust, so you lose control of them forever. Additionally, a lookback period applies. And trusts can be expensive to set up, so they’re less useful for smaller estates.
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real estate life. A life estate allows you to own real estate jointly with someone else, such as your spouse, and pass it on to them when you die. This may exclude the value of the family home from the Medicaid vehicle test. Life estates, like Medicaid trusts, are irrevocable, so you cannot change your mind and regain control of the estate. Medicaid’s five-year look-back rules also apply, so planning is essential.
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Medicaid annuity. An annuity designed to comply with local Medicaid rules may be excluded from your property for vehicle testing. An unscheduled person in need of long-term care may be able to transfer part of their assets to a loved one, which will likely trigger a reconsideration period. They can then use the rest of their assets to purchase an annual Medicaid benefit that generates enough monthly income to cover their long-term care costs until the penalty period expires. . However, annuities are very expensive and some states restrict their use for this purpose.
Key point
It is possible to get long-term care through Medicaid, but you’ll need to use some special strategies to protect your assets in order to pass the program’s vehicle test. Medicaid asset protection trusts, life assets, and Medicaid-compliant annuities are three ways that people who may not be eligible for Medicaid can get benefits for long-term care.
Long-term care planning tips
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A financial advisor can help you design a long-term care payment strategy that aligns with your own financial goals. SmartAsset’s free tool connects you with up to three financial advisors in your area and you can interview the right advisors for you for free to decide which one is right for you. If you are ready to find an advisor who can help you achieve your financial goals, start right now.
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ONE qualified income trust specifically designed to help people with incomes that are too large to qualify for local Medicaid affordability tests. A qualified income trust creates an account where high earners can transfer enough of their monthly income to meet Medicaid income restrictions.
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