Planning For The Cost of Long Term Care |
LONG TERM HEALTH CARE INSURANCE
Many of our clients should consider purchasing long term care insurance as a means of funding the cost of their long term health care needs. The catastrophic cost of long term care is one of the greatest threats to the security of our older adult clients. Less than three percent of the long term health care needs of our clients will be paid through Medicare and supplemental health care insurance. Long term health care insurance can offer coverage not only for the high costs of nursing home care but also for the costs of being cared for in the home or in an assisted living facility. The key is to be a good consumer and ask the right questions about the coverage that is right for you. The Indiana Department of Insurance is a good starting point for consumers. You can contact the Department’s Consumer Services Division at 1-800-622-4461 (toll-free) with your questions about long term care or health insurance. The State Health Insurance Program (SHIP) offers free counseling and informational brochures to consumers about their insurance needs. You can call SHIP at 1-800-452-4800 (317-233-3475 for Marion County) for information or to see if the Program has a counselor in your area of the state. You can also visit the SHIP web site at www.in.gov/idoi/2399.htm or send an email to nfrazee@idoi.in.gov.
MEDICAID
Unfortunately, many of our clients approach us when it is too late to purchase long term care insurance. Medicaid may then be an alternative.
Medicaid is a federal program which is independently administered in each state.
Medicaid is quite different from Medicare, which is an insurance program providing payment for medical needs for persons 65 and over and for certain disabled persons.
Medicaid is one of the most difficult and puzzling laws in this country, complicated by the fact that each state has its own interpretation of what the federal law means.
THE FACTS ARE ...
The average cost of a year's stay in an Indiana long term care facility ranges from $42,000 to $45,000, making it difficult or impossible for most persons to pay for their care.
Most people who need care for extended periods will eventually deplete their assets and be unable to pay the costs of their care.
Medicaid is of great importance to older adults because the cost of long-term care for such illnesses as Alzheimer's disease or paralysis caused by a stroke is not covered by Medicare. With our expertise in Medicaid law, we can assist you in planning for the expenses of long term care as well as planning for the protection of resources for you and your family.
TWELVE COMMON MYTHS ABOUT MEDICAID:
1. Medicaid will take my home.2. If I'm already in a nursing home, it's too late to plan for Medicaid.
3. All of my property will be turned over to the nursing home or Medicaid.
4. I will lose my Social Security or pension income if I go on the Medicaid program.
5. If I'm in a nursing home, I can't provide for my spouse or for my disabled or minor children.
6. If my spouse is in a nursing home, Medicaid will make me split our resources 50/50.
7. My income alone is fairly modest. If my spouse goes into a nursing home, I won’t have enough income on which to live.
8. I can't own any assets of value and qualify for Medicaid.
9. I can't own any real estate and qualify for Medicaid.
10. Medicaid will not pay for my care if I want to remain in my own home.
11. If I have received Medicaid benefits during my lifetime, Medicaid will take all of my estate when I die.
12. I cannot pass the family farm onto my children, even if I have been actively involved in the operation of the business.
With proper legal planning, the Medicaid applicant has many options available to preserve personal property and real estate for his or her future needs or for the protection of his or her family. The twelve myths listed above illustrate the many misconceptions people have about Medicaid. Medicaid planning can provide a favorable solution to all of these concerns.
Medicaid Estate Recovery
I am sorry to report that citizens, once again, have not been given a voice in the Indiana legislative process. The Indiana General Assembly made sweeping changes to Medicaid law affecting Indiana's senior citizens, particularly those requiring nursing home care. The changes which include expanded estate recovery from the Medicaid recipient's and his or her spouse's estates raise serious legal and administrative issues and have consequences for seniors that were undoubtedly unintended. Since the amendments were inserted into the massive, 211 page budget bill in the final days of the General Assembly, they received no public comment or debate.
The provisions that were passed may have severe consequences for the citizens of Indiana, particularly its older adult population as the examples below illustrate. It is imperative that Indiana 's citizens be encouraged to seek legal counsel in estate planning, particularly if they anticipate a need for long-term care in their futures.
WHAT YOU SHOULD KNOW ABOUT THE NEW LAW:
Current law: Allows Medicaid to seek estate recovery from the estate of a Medicaid recipient.
New law: Allows Medicaid to seek estate recovery from the estate of a Medicaid recipient and the estate of the recipient's spouse. Because the change is not prospective, recovery can be made against the estate of a non-recipient spouse even if the Medicaid-recipient spouse died years ago.
Example #1:
Farmer John's wife lived three years in a nursing home receiving Medicaid benefits. She died in 1995. The new law says that when Farmer John dies, the State can file a claim against the family farm John works with his three sons to satisfy its $90,000 "preferred claim." Under the current law, John's farm is protected as it is in his estate, not the estate of the now deceased Medicaid recipient spouse.
Example #2:
Widow Mary moves in with her daughter, Sue, after the death of her husband in the early 1990s. Sue provides home care for her mother, a victim of Alzheimer's disease, in Sue's home, keeping her mother there till she dies in 2006. Mary never receives Medicaid. Mary had $25,000 in a small savings account, and she added her daughter to the account in 1998 as a joint owner. This small token of Mary's appreciation for her daughter doesn't even compare to the cost savings to the State as a result of Sue's home care for her mother. But because Mary's deceased husband received Medicaid for a nursing home stay in the 1990's, the State claims all the funds in Mary's joint account when Mary dies.
Example #3:
Widower Thomas who has $100,000 in assets remarries. Some of those assets were acquired after the death of his first wife. His second wife, Thelma, brings no assets into the marriage. Thomas changes his will to provide for Thelma upon his death. Thomas and Thelma are married for fifteen years when Thomas becomes terribly ill. For the next five years, Thelma struggles to care for her husband, a stroke victim, at home until his death. He never received Medicaid, but because his first wife received Medicaid for years in a nursing home, the State makes a claim against his estate when he dies, leaving Thelma penniless.
Many older adults will consider moving out of state to avoid Medicaid's estate recovery. Since federal law currently does not allow recovery from the estate of the deceased non-recipient spouse's estate, the Indiana provision is in conflict with federal law, and it is likely to be challenged in court. However, until this issue is resolved, if your spouse is receiving or in the past received Medicaid, then your estate is at risk if you die.
ANNUITIES
The message here is plain and simple. Do not purchase annuities without getting counseling from an elder law attorney if there is a chance that you or your spouse may ever need Medicaid!
Current law: Annuities fall under the general estate recovery provisions which track the non-probate recovery provisions proposed by the probate bar and passed by the General Assembly in 2002. See also the Section of this website entitled "Medicaid Alerts" for information on additional changes affecting annuities as a result of the Deficit Reduction Act of 2005 enacted into law on February 8, 2006.
New law: Allows Medicaid to seek estate recovery from any beneficiary for annuities purchased after May 1, 2005 by the Medicaid recipient or his/her non-recipient spouse.
Provisions of the legislation also deal with the creation of additional new rights for the state Medicaid office in estate recovery. There are sections of the act that allow Medicaid to set standards for court awards of spousal support (e.g., in a guardianship). While I will not discuss these issues in this bulletin, these provisions also create some unintended consequences and, again, are major changes made in public policy without the benefit of input from the citizens of Indiana.
Please call to schedule a consultation if these issue impact your planning for the cost of long term care.
Sincerely,
Claire E. Lewis
Notice: The information above is provided as an update to our clients and visitors to this website. This is for information purposes only and does not constitute legal advice.
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