The costs of long-term care continue to rise. The average cost of one month in a nursing home, according to the State of Michigan, is now at $6816 per month or almost $82,000 per year. The hourly cost of home care is $20 or more per hour. This is more than most people can afford. A recent Harvard study noted that 69% of single individuals and 34% of married couples would use up their life’s savings after paying for a nursing home for less than a year. In addition, these same individuals also cannot afford the high cost of long-term care insurance.
Therefore, getting funding to pay for the high cost of long term care is very important. The government program that provides help in paying for the cost of long-term care is Medicaid. Unfortunately, the government has very strict rules about assets that must be met before it will pay for these high costs. The rules are very different depending upon whether the person is pre-planning or crisis planning.
Medicaid pre-planning occurs where a person who is not yet paying for long-term care takes steps to plan for Medicaid. Crisis planning occurs where the person plans for Medicaid while already paying for the high cost of nursing home or home care. Most persons and couples do not engage in pre-planning because they are willing to take the chance that they will not need to deal with long-term care. However, statistics show that it is more likely than not that those persons over the age of 65 will have these long term care issues. Therefore, when one considers the advantages of pre-planning it makes sense to plan ahead, or “pre-plan” for Medicaid.
With state and federal budgets running at a deficit, both areas of government have tightened their rules regarding Medicaid planning. This is especially true with regard to Medicaid crisis planning. For example, it used to be that a person in a crisis planning situation could save one-half to all of the assets in an estate under a crisis plan, and had no state liens on homes or annuities. Now, the government has implemented rules that make it unlikely that the person in crisis will be able to preserve over 50% of their assets; there are also rules regarding liens on annuities and homes that could lead to the loss of those items.
However, with respect to Medicaid pre-planning, the main change is that the look-back period for asset transfers has been extended to five years, rather than the previous three years. One who does pre-planning can still preserve up to 100% of their assets and also preserve their home and annuities. For most people their savings is therefore in the range of tens of thousands if not hundreds of thousands of dollars when pre-planning. In addition, such pre-planners lessen their stress in being able to qualify for Medicaid in a short period when needed versus the more extensive work required for crisis planning. Finally, pre-planners reduce the costs of their plans significantly (most pre-plans are one-half to one-quarter of the costs of the labor intensive crisis plans).
In sum, Medicaid pre-planning has immense value because a person’s nest egg can more effectively be preserved to help increase their quality of life in the later years, as well as preserve the entire estate for the provision of a spouse. In addition the planning is done at a time when there is no crisis and is much less stressful and cost-effective. At Heritage Elder Law we would be happy to provide a free consultation to review this and other elder law options for individuals or spouses. Proper information regarding legal rights in this area can make a significant difference in accomplishing the goals of providing the best care for those who need help with long-term care.
