How the government is involved at state and national levels.
As we discussed in our prior article, long term care is a reality best faced sooner, rather than later. There are already many laws and much government involvement in long term care, both on local, state and national levels. Let’s take a look at some of these areas where long term care and laws intersect.
First, keep in mind that the government has defined long term care as care you are likely to need for at least 90 days. Long term care insurance policies that are tax qualified (meaning you can deduct premiums –based on a chart – along with other health expenses), will pay for care if it meets this government definition and either one of these two events happen:
- Severe cognitive impairment (senility, dementia, Alzheimer’s, Parkinson’s, etc.)
- Inability to perform two of these activities of daily living:
Even though many people mistakenly believe that Medicare will take care of most long term health needs, Medicare pays for less than 2% of the cost. A survey conducted by AARP showed that 79% of those expecting to need nursing home care incorrectly believed that Medicare would pay.
Medicare will pay for long term care in a nursing home only if the following requirements are met:
- Skilled care is being provided. This is 24 hour per day care provided by licensed medical professionals under the direct supervision of a physician.
- The nursing facility is a “Medicare participating” nursing facility. Many nursing homes will not qualify under this requirement.
- The nursing home stay must follow (within 30 days of discharge) at least a three day hospital confinement.
- The care must be somewhat “restorative” in nature.
If an individual meets these requirements, Medicare will pay all the costs of the first 20 days and the individual pays $164.50 for an additional 80 days (in 2017, adjusted annually). After day 100, Medicare will no longer pay.
Medicare will pay for long term care in a home health care situation only if the similarly stringent requirements are met. Home health care coverage through a Medicare Certified Home Health Care Agency includes:
- Part-time or intermittent skilled nursing care
- Physical therapy
- Occupational therapy
- Speech therapy
We cannot count on Medicare to pay for long term care services.
Medicaid is the Federal/State program of medical assistance administered by each state according to designated federal requirements and guidelines. The program is financed from both state and federal funds. Currently, Medicaid pays about 40% of all nursing home expenses in the United States. It was designed to help those with little or no assets and low income.
Although Medicaid was designed for the poor, many individuals approaching retirement age have attempted (in vain in many cases) to find ways of disposing of or “hiding assets” so that if they ever need to enter a nursing home, they can qualify for Medicaid.
Currently, there are a number of states, including an oft cited recent Supreme Court decision in Pennsylvania, where Filial Support Laws exist and have even been enforced. These laws can sometimes require children to pay for their parents’ care.
In addition to a moral (and potentially legal) dilemma of “hiding assets”, there are more significant potential problems which must be faced:
- Look- back Period: for transfer of assets is now 5 years prior to applying for Medicaid.
- Gift Taxes: Giving money away can frequently be more expensive than keeping it and finding other ways to protect it. Both federal and state gift tax laws (imposed in a number of states) must be considered. (Of course, contact your accountant to discuss this.)
- Too much Income: Even if you do manage to effectively give away all your assets, a maximum income of $2,205 (in 2017) is allowable for the confined spouse. The income of the community (healthy) spouse is not counted in determining Medicaid eligibility.
- Loss of Independence: Most individuals do not enjoy the prospect of asking their children – or whomever they have given assets – for money each time they wish to go on a vacation, buy a special gift, etc.
- Control of Assets: Once one gives money away, legally it is no longer his. Attorneys have numerous, sometimes heart wrenching, stories of parents who have given assets to children who have subsequently lost those dollars through drug abuse, gambling, or simply unexpected divorces or bankruptcies.
- Choice of Facility: Many of the finer nursing facilities require that the prospective resident can pay privately for six months, a year, two years, or even longer, before the application is even considered.
What are Partnership Plans?
Today many states have Partnership Plans with long term care companies to address the escalating costs associated with long term care.
Partnership Plans are cooperative efforts between private LTC insurers and Medicaid designed to encourage individuals to plan and provide for their long-term health needs. These programs enable individuals to retain resources in an amount equal to the insurance benefits paid under a qualified long-term care insurance policy. Resources they would normally be required to spend on long term care. If the individual needs assistance in paying for long term care and applies for Medicaid, resources protected under Medicaid and Estate Recovery are equivalent to the amount of LTCI benefits paid under the policy.
With awareness of these Partnership Plans, as well as Filial Support Laws, Medicare and Medicaid can help us better make decisions about potential long-term care needs.
With thanks to contributor Carol Einhorn of Trisure Group.
Carol G. Einhorn is a nationally known long-term care insurance specialist. She is principal, along with her husband Jules, of TriSure Group, an insurance firm that focuses on life insurance, disability and long-term care.
Carol lectures frequently to groups of seniors and health administrators concerned with the issues of long term care, Medicare and Medicaid and has authored a number of articles on these topics. Also, she presents seminars to accounting and law firms and has been a guest on a variety of radio and television programs. She has served as a consultant to many major insurance companies and has testified as an expert witness before the Pennsylvania State House Insurance Committee.
She says: “My best attribute is that I am a good and compassionate listener and I apply my 25+ years’ experience in the long-term care industry to help solve problems for clients.”
Carol can be reached at:
P.O. Box 220
Langhorne, PA 19047
Disclaimer: The material in this blog is for educational purposes only. It is not intended to replace, nor does it replace, consulting with a physician, lawyer, accountant, financial planner or other qualified professional.