An Introduction to Long-Term Care Planning

By: Attorney Sam Azinger
O'Leary-Guth Law Office, S.C.

Long-term care planning involves coordinating a variety of services to plan for an elder’s housing, health care, and quality of life.  These tasks can be challenging enough on their own, but they become even more challenging if you or a loved one is not in a position to privately pay for everything needed.  An elder law attorney can help with long-term care planning, can guide discussions about long term-care planning with loved ones, and can help strategize regarding options for paying for necessary services.

Summary of Medicaid: 

If an individual is unable to privately pay for their long-term care, Medicaid is an important program to understand. 

Medicaid is a joint Federal and State program that can assist individuals with paying for long-term care expenses once they no longer have assets available to support themselves.  In general, the maximum available assets a person can have and qualify for long-term care Medicaid is $2,000.  If a person is married, their spouse can also retain between $50,000 and $130,000 of available assets. The exact amount is calculated based on the assets the married couple had at the time the spouse entered a long-term care facility.

Assets that are not included in the calculation of available assets include (1) exempt assets such as a home, prepaid funeral expenses, tangible personal property, one automobile, etc. and (2) unavailable assets such as assets held by a qualifying trust, assets which the individual does not have access to, or assets that cannot be made available within 30 days.  A home is only exempt if the spouse or dependent relative is living in the home or if the Medicaid participant is able to “express their intent to return home.”

If a person qualifies for Medicaid, it can pay for their long-term care expenses, including room and board in a facility, healthcare costs, medications, and more.  However, benefits received from Medicaid are subject to recovery from the person’s estate after their death, or following the death of their spouse (if they are survived by a spouse).  This reimbursement process is known as “estate recovery.” To the extent the government is repaid after your death via estate recovery, the Medicaid benefits you received were more of a loan than a grant. 

Long-Term Care Insurance vs. Self-Insuring:

Long-term care insurance can be an alternative to or a supplement to Medicaid. 

Long-term care insurance is a product sold by life insurance companies designed to help people prepare for the costs of long-term care.  Much like all insurance products, underwriters assess risk and determine what the product will cost based on the anticipated risk.  Depending on factors such as age and health, long-term care insurance may be cost prohibitive. If purchased at a younger age, premiums will be lower, but you would likely pay the premiums for many years before filing a claim.  If purchased too late in life, the premiums could be unaffordable.  Typically, a good time to purchase long-term care insurance is between the ages of 50 and 60.

Many people have the ability to self-insure.  That is to say, if they have enough money to pay for their long-term care if and when the need arises, they may not want long-term care insurance.  Long-term care can cost more than $100,000 per year, and on average a person resides in a long-term care facility for less than 3 years according to the National Nursing Home Survey published by the Center for Disease Control.  If someone has sufficient assets to pay for care, then self-insuring might be the best option for them. 

Planning for Medicaid:

For people who do not have the means to purchase long-term care insurance or self-insure, planning for Medicaid can help improve their quality of life, as well as preserving assets, if preserving assets is one of their objectives. 

A very important aspect of planning for Medicaid is ensuring that a person has good power of attorney documents in place.  These power of attorney documents should be prepared by an attorney who has knowledge and an understanding of Medicaid to ensure an agent is given proper authorization to conduct affairs in a way to plan for long-term care.

Maximizing exempt assets is also an important part of long-term care planning.  Prior to running out of money, money could be spent on exempt assets that may be needed in the future.  Some good ways to use money prior to qualifying include (1) prepayment of funeral arrangements, (2) purchasing personal items that could be needed in the future, (3) purchasing a more expensive vehicle, or (4) making improvements to an exempt home.

Preserving assets in a qualifying trust can also help keep assets available to pay for someone’s needs without interfering with their ability to qualify for benefits.  A qualifying trust generally must include provisions that require Medicaid be paid back after death, however having the assets available to pay for needs during the Medicaid participant’s lifetime can improve the quality of their life without penalty for transferring assets.

Divesting (giving away assets) is also a way to preserve assets.  In general, a person who gives away assets within 5 years of qualifying for Medicaid will be subject to a penalty based on the amount of the gifts.  Giving away assets isn’t always in someone’s best interests, and because there are significant traps, should only be done with the assistance of an attorney.

Locating the Right Nursing Facility:

Selecting a long-term care residence can be a stressful ordeal.  Being unfamiliar with the quality and requirements of facilities can make the search difficult and strenuous.  Senior advisors are available in almost all areas to assist in locating a good home that fits the circumstances of the individual when the time comes.  These services are often free to their clients, as the advisors are paid by the facilities.  In selecting a facility, being able to pay privately when admitted often increases the chances of being able to get into a better home, but if Medicaid may be needed in the future, it is very important to confirm that a nursing facility will accept Medicaid when the time comes. 

Quality of Life:

A primary objective should always be preserving the best quality of life.  Using someone’s assets to pay for their care is often in their best interest.  Nursing home applications typically require disclosure of assets to confirm that the resident will be able to pay privately for a certain period of time.  Better quality nursing homes tend to be able to be more selective in their residents, so showing assets available to pay privately for an extended time can help someone get into a higher quality facility.  

Preserving the best quality of life, Medicaid planning, and asset preservation are not necessarily mutually exclusive. Having good legal advice and a good plan can help you achieve all of your objectives.

O’Leary-Guth Law Office, S.C. has attorneys that can help you and your loved ones with long term care planning.  Please reach out if you would like to discuss how we can be of assistance.