If you work and pay taxes for at least 10 years, you will qualify for Medicare when you reach the age of 65. This program will provide a solid underpinning, but there are deductibles, co-payments, and premiums that you have to pay out of your own pocket.
For many people, these expenses are not overwhelming, but there is one gaping hole in the coverage that can yield devastating financial consequences. Medicare will not pay for the custodial care that you would receive in a long-term care facility or nursing home.
Long-Term Care Costs
It is not easy to get out a checkbook and pay for a stay in a nursing home. In our area, the median cost for a year in a private room in a nursing home is over $192,000. The same period of time in a one bedroom unit in an assisted living community comes with the median cost of $76,200.
The average length of stay is one year, and according to the United States Department of Health and Human Services, 35 percent of elders will eventually reside in nursing homes.
Fortunately, there is a widely embraced solution in the form of Medicaid. This jointly administered federal/state government program will pay for long-term care if you can gain eligibility.
It is designed to assist people with very limited financial resources, so there is an asset limit. In most states in the union, the limit is $2000, but New York is different. In 2020, the Medicaid asset limit here is $15,750.
That may sound like a deal breaker if you have been reasonably successful throughout your life, but fortunately, there are some things that you own that do not count. Your home is not a countable asset, and in our state in 2020, the equity limit is $893,000.
Household goods are not counted, along with personal effects, wedding rings, engagement rings, and heirloom jewelry. One motor vehicle that is used as a primary source of transportation is not counted, and you can have a prepaid burial plot.
Unlimited term life insurance is allowed, along with $1500 worth of whole life insurance. You can also set aside as much as $1500 for final expenses.
Five-Year Medicaid Look Back Period
You can give gifts to your loved ones before you apply for Medicaid to get most of your countable assets out of your own name. This would essentially be an exercise in giving them their inheritances in advance.
However, you cannot find out that you need long-term care today, give away assets tomorrow, and qualify the next day. There is a five-year Medicaid look back period. You are penalized, and your eligibility is delayed if you give away assets within five years of the submission of your application.
The duration of the period of ineligibility would depend on the amount that you gave away. For example, if you gave away enough to pay for one year of nursing home care, your eligibility would be delayed by one year.
Child Caregiver Exemption
As we have stated, your house is not considered to be a countable asset, so you could qualify as a homeowner. However, Medicaid is required to seek reimbursement from the estates of people that were enrolled in the program. They could potentially attach your home after your death.
This is why you would want to divest yourself of ownership of the property at the right time in light of the five-year look back period. However, there is one exception to the rule.
If an adult child of yours has been living in your home as a caregiver that is making it possible for you to stay out of a long-term care facility, you can give the child the home. There is a Medicaid Caregiver Child Exemption, so this is something to keep in mind.
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