Assets must be below $2,400; exempt assets include a car, burial fund, and some life insurance.
After assets are reduced to $2,400, income will be examined. The cost of nursing home care minus income will equal the amount Medicaid will pay to the medical facility.
Gifts made within 36 months (60 months for trusts) of the application for Medicaid may result in a penalty period of ineligibility.
Prior to 1988 there was no protection for the Medicaid applicant’s spouse; all assets were used to pay the medical care of one spouse. However, since 1988 spouses were given limited protection. Currently, the healthy spouse may shelter up to half of the combined assets not to exceed $84,120. Generally, the healthy spouse’s IRA or pension is also sheltered.
Paying for nursing home care is rarely considered until the need arises; unfortunately, it is usually too late to plan adequately for Medicaid. Long term care insurance can play an integral part in planning for nursing home care as well as providing financial and emotional comfort to the family of the nursing home resident.
When considering buying a long term care policy there are three key questions you should be able to answer before committing; if you already own a long term care policy these questions should be answered to determine if the policy still meets your needs.
When Am I Eligible for Coverage?
Policies differ as to what events trigger coverage. Typically, benefits are payable when a person is unable to perform certain activities of daily living such as bathing, dressing and eating. Some policies clearly define each activity, while others do not. The more specific the policy, the less aggravation you or your family will encounter when a claim is filed.
Another method insurance companies use to determine when eligibility begins is mental incapacity. This eligibility requirement provides benefits when the insured is unable to pass certain mental function tests administered by a physician. Depending on the policy, the physician may be selected by the insurance company or the policy holder.
When Do Benefits Begin?
With many policies your benefits will not begin the first day you enter a nursing home. Most policies include a waiting period. This means benefits begin 20, 30, 60, 90 or 100 days after you enter a nursing home. The downside is that during this period you will have to cover the cost of the care yourself. Some policies only cover stays in nursing homes while others include care in your home or in an adult day care center.
What Happens If the Cost of Care Increases?
Inflation protection may be the most important factor in evaluating your policy, especially if you purchase your policy at a young age. If your policy does not provide for inflation, you may find yourself with coverage for only part of the cost of care. For example, care that costs $86 a day now will cost $228 in 20 years, assuming an inflation rate of 5% a year.
Inflation protection can be offered through automatic increases in your benefits each year or through increases periodically, such as every three years. There are also specific differences in the formula used to determine the increase which should be explained in your policy.
If you already own a policy, review it. Making changes to an existing policy is possible and is usually more affordable than buying a new one.
– Leslie Heffernen