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Guarding Your Wealth for Seniors
Don’t Rely On Medicaid For Long-Term Care
Part two of series on Long-Term Care
By Jeffrey D. Voudrie, CFP
Jan. 20, 2006 - Millions of retirees expect to rely
on Medicaid to cover the cost of their long-term care needs. If you or
your parents have that expectation then you must read this article. You
shouldn’t rely on this program and by doing so you may end up becoming
dependent on family and friends for care.
Medicaid is a government program designed to
provide medical care for those who are impoverished. The costs for this
program are exploding. Federal Medicaid expenditures now account for the
fifth largest budget item behind Social Security, defense, debt service
and Medicare. Based on its current rate of growth, Medicaid expenditures
will soon be greater then those spent on Medicare.
The majority of the cost is due to the growing
number of Medicaid recipients. Currently, 1 in 4 nursing home residents
are covered by Medicaid. That number has been growing almost 12% per
year. Aging baby boomers will only increase this rate of growth further.
There isn’t money in Federal or State budgets to
cover this expected growth. In an effort to reign in costs, Congress is
working on a bill that will make it harder to qualify for Medicaid.
Here are a few of the bill’s provisions: 1)
Medicaid coverage of nursing home care will be prohibited for those with
home equity of $500,000 or more. 2) The ‘look back’ period for the
transfer of assets will be extended to 5 years. 3) Certain annuities
previously set up to shield assets from Medicaid would now have to name
Medicaid as the beneficiary, with the remainder going to Medicaid after
death. 4) States are given more leeway in reducing what they pay and
limiting benefits for certain enrollees.
The purpose of this legislation is to keep people
from ‘gaming’ the system. Medicaid is designed for the impoverished. It
isn’t designed for those who want the government to pay their nursing
home costs while they pass on significant assets to their loved ones.
In the past, you could reduce your assets by
gifting them to your loved ones. As long as you didn’t apply for
Medicaid within three years of that gift, it would not be counted as an
asset. Now, you’ll have to wait five years.
You’ll no longer be able to buy an annuity, hoping
that only the income will be counted, thus ‘shielding’ that asset. The
government is eliminating this loophole.
If you live in a part of the country that has seen
exponential real estate growth, such as Southern California, look out.
Seniors in such places, even if they have few other assets, may be
forced to sell their homes and spend that money before qualifying for
Medicaid.
‘Medicaid planning’, the taking of steps to move
and shield assets so that they aren’t counted by Medicaid, won’t be as
effective as it was in the past. And qualifying for Medicaid is no cake
walk.
In general, a person can only have $2,000 in what
are referred to as resource assets in order to qualify. A resource is
any asset that can be used to produce income. If both husband and wife
attempt to qualify, the amount is $3,000.
The coverage for in-home care is very restricted in
Medicaid. Plus, it will only provide limited funds specifically for
care. That means it will continue to be your responsibility to pay the
mortgage, taxes, insurance, utility and food bills. This is designed to
shift care to those in nursing homes where it is cheaper.
If you need skilled nursing care at home, custodial
care is also provided. But if you need custodial care alone, its
coverage is very restricted. If you want to remain in your home,
independent, as long as possible, then don’t expect to rely on Medicaid.
For those needing care at a nursing home, Medicaid
doesn’t cover the entire bill. Any income you receive is first applied
to the bill. This includes your Social Security, pension, annuity and
other income. Medicaid then pays for the remainder.
The bottom line is that you and your parents should
not rely on Medicaid to meet your long-term care needs. Nor should you
rely on your ability to transfer assets to your loved ones and still
qualify. I’ll discuss viable alternatives in the next article.
If you have a specific question or would like more
information give me a call toll-free at 1-877-827-1463 or go to
www.guardingyourwealth.com. You can also reach me by email at
jeff@guardingyourwealth.com.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Please
visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive.
Guarding Your Wealth for Seniors are
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens. Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For booking information, email e-mail
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