A lot of people do not understand why they should be concerned about potential nursing home costs. They adopt this stance because they think that it is unlikely that they will need this type of care. After all, if you do need living assistance, Medicare will pay for it, right?
Let’s take a look at these assumptions so you can go forward with the real facts.
Long-Term Care Statistics
The United States Department of Health and Human Services maintains a very useful website called LongTermCare.gov. We urge you to check it out if you would like to learn more about this important subject.
There is a lot of research cited on this website, and one statistic is particularly eye-catching. Seven out of every 10 people that are reaching the age of 65 on any given day will ultimately require help with their activities of daily living. About 35 percent of them will reside in nursing homes.
To provide some clarity, if today was your 67th birthday, your life expectancy would be 85 if you are a man, and 87 years if you are a woman. When you put these numbers into perspective, you can see that you may well experience life as an octogenarian.
It is not hard to imagine why many people in this age group need living assistance.
Medicare Gap
The vast majority of Americans will qualify for Medicare coverage when they reach the age of 65. This health insurance program will provide a strong underpinning, but there are deductibles, copayments, and premiums that you must pay for out-of-pocket services that are covered.
These can be manageable for many people, but there is one enormous gap that is not easy to overcome. Medicare will not pay for a stay in a nursing home or any other type of long-term assisted living facility. It will pay for convalescent care after an injury or illness, but it does not cover custodial care.
Long-Term Care Costs
It is not easy to pay nursing home bills on your own, because these facilities are extremely expensive. Genworth Financial is a company that offers financial products to senior citizens, and they conduct a lot of in-depth research to gain an understanding of the state of long-term care costs.
They have found that the median annual cost for a private room in a nursing home in the Lafayette, Indiana area was just over $104,000 in 2021. For a semi-private room, the figure was $87,600. The average length of stay is one year, and if you are married, your family may face two different sets of nursing home bills.
What’s the Solution?
Now that you know why nursing home asset protection is important, we can move on to the solution. Medicaid is a jointly administered federal/state government health insurance program that will pay for custodial care. However, it is a need-based benefit, so there is a low asset limit of just $2,000.
The good news is that some things don’t count, including your home with an equity limit of $688,000 this year. Your household belongings and personal effects are not counted, along with one motor vehicle. Wedding and engagement rings are exempt, and if you have any heirloom jewelry, it would not be counted.
You can have a prepaid burial plot and prepaid funeral set aside for final expenses. There are also provisions for a healthy spouse that can live independently, but we will share them in a future blog post.
To get countable assets out of your own name so you can qualify for Medicaid, you could fund a Medicaid trust (irrevocable asset protection trust). However, there is a five-year look back period. You have to complete the gift giving at least five years before you submit your application.
If you violate this rule, your eligibility is delayed. To provide an example, let’s say that the state Medicaid program determines that the average cost for nursing home care in Indiana is $86,000 a year. We will say that you funded a trust with $160,000. That would have paid for almost two years of nursing home care, so your eligibility would be delayed by just under two years.
Schedule a Medicaid Planning Consultation!
We are here to help if you would like to prepare for these potentially devastating costs. You can send us a message to request a consultation appointment, and you Lafayette office can be reached by phone at 765-767-5225. If you are closer to Schererville, the number for our office there is 219-865-2285.
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