Thought Leadership in Action

For an increasing number of families, long-term care planning is becoming a topic discussed with an unfortunate frequency. When a once healthy and vibrant person needs full-time care—either suddenly or through the ravages of a progressive illness—staggering pressures can bear down on that person, their immediate family, and close friends.

One of the first and most natural questions that comes to mind is the question of cost: Where will the money come from to allow the individual to live out the rest of his or her life in the most comfortable situation possible? For a fortunate few, long-term care insurance will provide the necessary funds. For others, the savings of a lifetime can be depleted in a relatively short period of time without proper planning.

At some point, the discussion of funding care will no doubt turn to Medicaid, a difficult topic to deliberate when combined with the stress of caring for a loved one, and a topic many otherwise well-informed individuals misunderstand.

What is Medicaid?

Medicaid is essentially a state and federally funded program that is administered by both levels of the government. First and foremost, it is an entitlement program, differing from Medicare in that it is a needs-based welfare program. Eligibility for Medicaid is said to be both “categorical” and financial. In other words, eligibility first depends on a person being over age 65 or having a physical or mental incapacity that causes them to need care. Financial criteria based on both income and assets are then assessed.

What is “Countable”?

While the dollar amounts may vary somewhat, individuals typically may have no more than $2,000 of “countable” assets and a low maximum monthly income that varies depending on which state in which the individual resides. The asset test causes the most confusion; all assets are countable unless specifically exempt. This includes savings and all real estate other than a personal residence.

The shocking news for many couples is that their joint resources are considered together in determining whether one spouse meets the Medicaid resource limits. The excess above these limits must be spent down.

As one might expect, a number of techniques have been devised that can help protect assets from having to be “spent down” to pay for care. These may include: the use of a gifting program and a “Medicaid trust”; the conversion of assets to income; and increasing the level of exempt assets. Caution is the watchword; misuse of any of these techniques can make a difficult situation even worse.

The best option is to have planned ahead for the possibility of needing long-term care, either in a nursing home or at home, by obtaining insurance that will help protect you or your loved ones. Professional assistance with planning is a necessity, whatever your personal needs.

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