In my last Sixty and Me Blog, Paying for Long-Term Care: What Are the Options? I noted there are three sources of money to pay for long-term care:
This blog will cover more details about using government sources to cover these expenses.
One of the common assumptions about paying for long-term care is that government programs like Medicare or Medicaid will cover these expenses.
Medicare pays for such healthcare expenses as hospitalization, doctor fees and medications. It will also cover a temporary stay in a skilled nursing facility after a minimum of three days of hospitalization. However, Medicare does not cover most long-term care services delivered in-home or in residential care settings.
On the other hand, Medicaid provides healthcare coverage for qualified people such as low-income adults, children, pregnant women, the disabled and seniors. Medicaid is funded together by states and the federal government and administered by states.
Medicaid does cover long-term care costs but only for those who have a low level of income and assets. The idea is to force those who have money to pay for long-term care to use their own resources before relying on government funds.
A person who currently has too much income or assets can still qualify for Medicaid through a process called “Spend-Down.”
If a person receives more income than Medicaid allows, they can “spend-down” that income by paying medical expenses like:
Medicaid rules do not allow recipients to have too many assets. The asset limit is around $2,000 per individual in most states and about $3,000 for a couple.
However, some assets are exempt from this rule. Examples are:
States vary in how they treat funds in IRAs and 401(k)s, so a potential recipient should research the rules in their specific state.
In a situation where only one partner of a married couple is applying for Medicaid, what happens to the spouse who does not need long-term care? This other partner, defined as the “community spouse,” can usually keep more assets. Federal law allows states to set this asset level between $26,076 and $130,380. This is to ensure the healthy partner has money to live on.
For people interested in having Medicaid pay for their long-term care costs, there’s a temptation to reduce assets simply by transferring money to friends or relatives. However, medicare reviews a person’s financial transactions for the previous five years to prevent this. This is known as the “look-back period.”
If Medicaid determines that a person transferred or gifted assets for less than fair market value (FMV) during the look-back period, then there is a penalty. Medicaid eligibility is delayed for a time depending on the amount of money that should have been counted as assets.
Those who want to receive long-term care at home can still receive Medicaid benefits under the Home and Community-Based Services (HCBS) Medicaid waiver program. In general, the care at home must be equivalent to an “institutional level of care.”
Also, if family or friends are delivering in-home care services, they may be paid under Medicaid “cash and counseling” options. In-home services must be structured to meet the requirements of an authorized Medicaid care plan so the state will pay benefits.
Another way more assets can be protected from spend-down is Medicaid Asset Protection Trust (MAPT). Assets moved into a MAPT are no longer owned by the person receiving Medicaid benefits, but it allows assets to be passed on to beneficiaries because the money is protected from Medicaid estate recovery.
Under the estate recovery process, Medicaid recoups dollars from the recipient’s estate to compensate for the money it paid toward that person’s long-term care needs. The downside of MAPTs is they are complex and costly to set up.
While Medicaid and Medicare represent over 90% of the public money devoted to long-term care, there are some other public programs that may apply for people who qualify.
Offered in some states for those who qualify, PACE is a Medicare program providing care in settings outside a skilled nursing facility. More information and qualification rules can be found at Medicare’s PACE webpage.
The U.S. Department of Veterans Affairs (VA) provides long-term care benefits for qualified veterans. Care could be in-home or at VA nursing facilties. Find more information on the VA website.
SHIP is offered in every state to provide counseling and assistance on government programs related to long-term care.
When considering government sources to pay for long-term care, there are many details to keep in mind. Therefore, finding experienced financial professionals like elder law attorneys and Medicaid planning specialists can help to sort through all the options. Learn more about the details about paying for long-term care in my blog series at Living50+.
Are you or someone you love in need of long-term care? How are you/they planning to pay for it? Have you looked into government options? What have you learned in the process and what tips can you share with the community?