Long-term care is expensive. The current cost of assisted living in the Saint Louis metropolitan area ranges from around $2,500 to over $5,000 per month, and a nursing home bed runs from approximately $4,500 to $8,500 per month. The choices you have to pay for this care are private pay (spending your life savings), long term care insurance (assuming you have a policy in place prior to needing care), and government assistance. Medicare and health insurance do not pay for custodial care. Government assistance in the form of Medicaid can be a great benefit to help pay for the cost of care, if you qualify. There are several myths and misunderstandings about Medicare and Medicaid and exactly what the benefits are in regards to paying for long term care. Below are four myths followed by an explanation what actually is the case.
Myth #1: Medicare will pay for all of my nursing home expenses
While it is true that Medicare does pay for some nursing home expenses, the coverage is quite limited and is only for a short period. Medicare covers up to a 100 day maximum of “skilled nursing care” per instance of illness, of which only the first 20 days are fully covered. The patient must start paying a deductible of $152.00 per day from the 21st to the 100th day unless the person needing care has supplemental insurance that will cover the deductible. To qualify for Medicare, the patient must enter a Medicare-approved “skilled nursing facility” or nursing home within 30 days of a hospital stay that lasted at least three days, and the care in the nursing home must be for the same condition. Medicare coverage does not automatically continue for the 100-day maximum, but rather only for as long as the resident is receiving skilled care (most often, physical, occupational or speech therapy). Medicare coverage of nursing home stays typically ends after about 30 days.
Myth #2: You need to be completely broke to qualify for Medicaid
Medicaid helps low income people pay for long-term care, but you do not need to be broke to qualify. As of 2014, an individual living in Illinois is allowed to have up to $2,000 in non-exempt assets to qualify for Medicaid. In Missouri it is even less, only $1,000 in non-exempt assets. In addition to the non-exempt assets the Medicaid rules also allow an individual to keep, subject to state-specific limitations and conditions, a house (but subject to lien and estate recovery claims), a car, a pre-paid funeral, a very small amount of life insurance (Missouri exempts either the pre-paid funeral or a small amount of life insurance, but not both), and household goods and personal belongings.
There are also some breaks for married couples. In Illinois, the “community spouse” (the spouse not in the nursing home) is allowed to keep the residence and a maximum of $109, 560 in non-exempt assets. In Missouri, the spouse can keep the residence and half of the couple’s non-exempt assets, subject to a current $117,240 maximum. Each state also allows the community spouse a monthly income allowance.
But those rules can and should be the starting point, not the end, of the analysis. Married and single applicants should consult with an experienced elder law attorney to explore the possibility of engaging in planning that will enable them to qualify for Medicaid under circumstances in which a significant portion of their remaining assets, always half or more in Illinois and most often half or more in Missouri, can be protected from having to be spent down in order to pay for nursing home care.
Myth #3: A pre-marital agreement will keep my assets separate from my spouse’s if one of us needs to apply for Medicaid
A pre-marital (or post-marital) agreement only keeps assets separate in the case of death or divorce. Such an agreement has no effect for purposes of qualifying one spouse for Medicaid long term care benefits. The basic idea is that two parties cannot agree between themselves to something that would work to the disadvantage of outside parties who did not sign or approve the agreement.
However, getting a divorce to protect assets is a desperate option that is very seldom necessary to pursue. As noted above, a married couple is automatically entitled to protect more assets and income than a single person, and great legal planning opportunities can often protect most, or in some cases all, of the couple’s remaining assets.
Myth #4: I can make annual gifts to family members up to a maximum of $14,000 each without causing a later Medicaid eligibility problem
The Internal Revenue Service allows a person to make gifts of up to $14,000 per year per gift recipient without incurring any gift tax liability, but that has nothing to do with the Medicaid’s rules about making gifts. Making a significant gift or transfer within five years prior to application can delay eligibility under the Medicaid rules. The transfer penalty period does not start until the month in which the person applies and the length of the penalty depends on how many assets were given away or transferred within the five years. The more assets given away or transferred the longer the penalty period will be. In the case of a married couple, no penalty period is assessed when the spouse applying for benefits transfers assets to the community spouse.
Shedding light on these myths should bring clarity to individuals exploring options to pay for nursing home care and give them hope that Medicaid long term care benefits are a possible alternative. An individual or married couple considering Medicaid as an alternative should always consult with an experienced elder law attorney first. Many of the eligibility rules are confusing and complex. It’s easy to unknowingly violate the rules, or to miss opportunities that are permissible under the rules to protect assets.