America is aging, and as we get older, more and more of us have health problems that require long term care. Usually when we think of healthcare, we think of acute care meant to cure or treat a specific illness or ailment, like taking medicine, performing surgery, or receiving treatments over time. By contrast, long term care is care over an indefinite duration for people who cannot take care of themselves due to physical ailments, such as a severe stroke, or mental ailments, such as Alzheimer’s disease or dementia. Caretakers often provide custodial care – looking after the person – and help with basic activities of daily living such as eating, bathing and moving around the person’s living space.
Long term care can be provided in several settings: in a nursing home, an assisted living facility, or at home with home health aides. The problem with all of these settings is that long term care is very expensive. In New Jersey, nursing homes typically cost more than $10,000 per month. Prices are cheaper is some other parts of the country, but still very expensive. Likewise, assisted living facilities (which provide less intensive care than nursing homes) typically cost around $8,000 per month. Licensed home health aides often cost more than $20 per hour, which can add up if a person needs full-time care every day. (Family members can provide long term care, but that often takes a toll and becomes unsustainable over time.)
How do people pay for long term care? If a nursing home costs $120,000 per year, even a family that has saved significant funds will quickly deplete their nest egg, leaving their spouse impoverished and heirs bereft.
Fortunately, the government will pay for nursing homes and other long term care through Medicaid. Medicaid is a public benefit program, funded in part by the federal government and administered by each state, that provides healthcare to people. Medicaid can pay for the full cost of nursing home care, after the person’s income is applied. However, to qualify for Medicaid’s long term care benefit, you must meet strict eligibility requirements. Applicants usually must have less than $2,000 in qualifying assets (called resources), must have limited income, and must meet stringent medical requirements.
There are opportunities for Medicaid applicants to preserve assets within their families while qualifying for Medicaid. Those opportunities are complex – Medicaid has strict rules with which applicants must comply. If a Medicaid applicant makes gifts within the five year look-back period before applying for Medicaid, the applicant is penalized for those gifts. So applicants cannot simply give all their money away and then go on Medicaid.
However, there is room within Medicaid’s rules for Medicaid planning in order to preserve wealth and assets for family members that otherwise would have to be spent on long term care costs. Medicaid planning may involve a trust, annuity, structured gift, exempt purchase, or other technique, with the goal to realize value from property that otherwise would be lost to care costs.
If you’re interested in Medicaid planning, you should speak with an elder law attorney familiar with Medicaid’s complex rules. The National Elder Law Foundation (NELF), accredited by the American Bar Association, maintains a directory of Certified Elder Law Attorneys (CELA’s, certified by NELF) in every state. The National Academy of Elder Law Attorneys (NAELA) also maintains an attorney directory.
If you or a loved one may need long term care in the future, it is a wise idea to consult an elder law attorney for guidance on your options.
Thanks to our friends and contributors from FriedmanLaw for their insight into elder law, special needs and trusts and estates law.