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by John Bearss
Hi Jerry. Last week we talked about how Medicare works when dealing with long term care needs. What we discovered is that Medicare will only pay if you have first, spent at least three days in the hospital and then secondly, go to a skilled nursing facility. If you have done these two things then Medicare will pay for the first 20 days of skilled nursing care. From days 21 through 100 the patient must pay in 2010 the first $137.50 per day. If you have Medicare Supplement insurance, typically the Medicare Supplement insurance will pay the $137.50 per day through Day 100. After day 100 Medicare and your Medicare Supplement Insurance will pay nothing! Also keep in mind, Medicare does not pay for custodial care or intermediate care, only skilled care and you must be making progress or Medicare will not pay that cost.
Today I would like to discuss what happens if you want to apply for Medicaid to help with these costs. When you apply for Medicaid benefits, your assets will be reviewed to determine if you are eligible. Remember, Medicaid is a program that was developed for the impoverished and it is important to note that each state has different restrictions so it is important to learn the rules from your state.
But in most states, there are two tests that you have to pass in order to receive Medicaid assistance. The first test is the income test. Each state has established an amount of income that you or you and your spouse can have in order to qualify. Typically there are steps that you can take to satisfy this requirement.
The second test is the one most individuals struggle with and that is the asset test. Most states have spend-down provisions, and Medicaid eligibility is primarily dependent on the amount of your assets. Assets are counted jointly for married couples and each state has stringent restrictions on the amount of countable assets you can own. When you apply for Medicaid, your assets are classified as either countable or non-countable.
Countable Assests are all of those assets that count towards whether or not you qualify for Medicaid. With a married couple this is counted jointly and would include items like: cash, IRA’s, 401(k)’s, other investments like CD’s, Brokerage Accounts and also second homes just to name a few. These are the items that you would have to spend down before Medicaid would step in and pay for your nursing home costs. For a single person you typically have to spend-down to $1,500 before Medicaid will pay for your nursing home expenses. If you are married typically a portion of the money would stay with the spouse at home and the rest would need to be spent down and that amount varies from state to state.
Non-Countable Assets are also determined jointly, but these assets do not count towards being eligible for Medicaid assistance. These assets would include: buying a burial plot, prepaying for your funeral expenses, purchasing a properly structured annuity, remodeling your house, buying a new car just to name a few.
The big question that I get asked about is what happens to my house? For a single person, you have up to 6 months in the Nursing facility to determine whether you are going to go home. If you are not then you have to sale the house for fair market value and use that money to help pay your nursing home cost. For a married couple, as long as one spouse is still at home it is an exempt asset and is non-countable.
So as you can see the trick is to turn as many of your countable assets as you can into a non-countable asset and typically the two ways you can do this is to buy a long term care insurance policy or to own a properly structured annuity.
So again let me ask you the question I asked last week. Have you ever known any one that has become impoverished as a result of going to the Nursing Home? If you do then you know they did not plan ahead to help protect their assets from going to the nursing home and this can be the most financially devastating event in a person’s life.
So my advice, is to consider long term care insurance as a part of your financial planning strategy, because if you need long term care it can be expensive and it can wipe out your financial assets in a hurry.
I trust this financial insight has been helpful and I look forward to the next time when I can help you provide the foundation for a lifetime of financial independence.
About John Bearss: John R. Bearss is a Retirement Specialist with the Christian Financial Advisor Network. He has been helping clients and financial professionals understand financial strategies for 24 years.
Disclaimer: John Bearss is a registered representative of and does offer securities through Sicor Securities, Inc. Lifetime Decisions Management, nor it’s representatives provide legal or tax advice. Please consult your CPA or qualified tax advisor before making any decisions. Lifetime Decisions Management, Inc. is not a subsidiary of nor controlled by SICOR Securities, Inc.