| |
Millions of retirees expect to rely on Medicaid to cover the cost of
their long-term care needs. If you or your parents have that
expectation then you must read this article. You shouldn’t rely on
this program and by doing so you may end up becoming dependent on
family and friends for care.
Medicaid is a government program designed to provide medical care
for those who are impoverished. The costs for this program are
exploding. Federal Medicaid expenditures now account for the fifth
largest budget item behind Social Security, defense, debt service
and Medicare. Based on its current rate of growth, Medicaid
expenditures will soon be greater then those spent on Medicare.
The majority of the cost is due to the growing number of Medicaid
recipients. Currently, 1 in 4 nursing home residents are covered by
Medicaid. That number has been growing almost 12% per year. Aging
baby boomers will only increase this rate of growth further.
There isn’t money in Federal or State budgets to cover this expected
growth. In an effort to reign in costs, Congress is working on a
bill that will make it harder to qualify for Medicaid.
Here are a few of the bill’s provisions: 1) Medicaid coverage of
nursing home care will be prohibited for those with home equity of
$500,000 or more. 2) The ‘look back’ period for the transfer of
assets will be extended to 5 years. 3) Certain annuities previously
set up to shield assets from Medicaid would now have to name
Medicaid as the beneficiary, with the remainder going to Medicaid
after death. 4) States are given more leeway in reducing what they
pay and limiting benefits for certain enrollees.
The purpose of this legislation is to keep people from ‘gaming’ the
system. Medicaid is designed for the impoverished. It isn’t designed
for those who want the government to pay their nursing home costs
while they pass on significant assets to their loved ones.
In the past, you could reduce your assets by gifting them to your
loved ones. As long as you didn’t apply for Medicaid within three
years of that gift, it would not be counted as an asset. Now, you’ll
have to wait five years.
You’ll no longer be able to buy an annuity, hoping that only the
income will be counted, thus ‘shielding’ that asset. The government
is eliminating this loophole.
If you live in a part of the country that has seen exponential real
estate growth, such as Southern California, look out. Seniors in
such places, even if they have few other assets, may be forced to
sell their homes and spend that money before qualifying for
Medicaid.
‘Medicaid planning’, the taking of steps to move and shield assets
so that they aren’t counted by Medicaid, won’t be as effective as it
was in the past. And qualifying for Medicaid is no cake walk.
In general, a person can only have $2,000 in what are referred to as
resource assets in order to qualify. A resource is any asset that
can be used to produce income. If both husband and wife attempt to
qualify, the amount is $3,000.
The coverage for in-home care is very restricted in Medicaid. Plus,
it will only provide limited funds specifically for care. That means
it will continue to be your responsibility to pay the mortgage,
taxes, insurance, utility and food bills. This is designed to shift
care to those in nursing homes where it is cheaper.
If you need skilled nursing care at home, custodial care is also
provided. But if you need custodial care alone, its coverage is very
restricted. If you want to remain in your home, independent, as long
as possible, then don’t expect to rely on Medicaid.
For those needing care at a nursing home, Medicaid doesn’t cover the
entire bill. Any income you receive is first applied to the bill.
This includes your Social Security, pension, annuity and other
income. Medicaid then pays for the remainder.
The bottom line is that you and your parents should not rely on
Medicaid to meet your long-term care needs. Nor should you rely on
your ability to transfer assets to your loved ones and still
qualify. I’ll discuss viable alternatives in the next article.
I’ll personally respond to your questions, free of charge. Go to
http://www.guardingyourwealth.com and click on ‘Ask Jeff’.
In addition to being a nationally syndicated columnist and Certified
Financial Planning Practitioner, Mr. Voudrie provides personal,
private money management services to clients nationwide. |
|
