Though most of us prefer not to think about it, the odds are favorable that if we live long enough we will need long-term care. Ignoring that very real possibility could have dire financial consequences given the high cost of long-term care. Another thing you do not want to do is count on your basic health insurance policy to cover the costs of that care because most policies do not unless you have purchased a separate long-term care rider at an additional cost. Medicare is equally unlikely to help. The good news is that Medicaid does cover long-term care costs; however, qualifying for Medicaid benefits can be tricky for most seniors given the extremely low income and asset limits that cannot be exceeded to qualify. Unless you can afford to pay for long-term care out of pocket, planning ahead is the key to protecting your hard earned assets. Only you can decide if long-term care insurance is worth the cost of premiums; however, even if you do decide to purchase long-term care insurance you should still include Medicaid planning in your comprehensive estate plan in case you need to depend on Medicaid in the future.
The Cost of Long-Term Care
The average person has no idea how much long-term care costs. Nationwide, a year in long-term care will cost, on average, about $80,000. In the State of North Dakota, that same stay will run you between $100,000 and $105,000, depending on whether you choose a semi-private or a private room. With an average stay of 2.5 years, you could rack up a long-term care bill of over a quarter of a million dollars ($250,000)! Most people do not have that kind of money just sitting around waiting to be spent on healthcare costs. How would you pay a $250,000 long-term care bill?
Long-Term Care Insurance
The average health insurance policy specifically excludes long-term care costs from there list of covered expenses. You can, however, purchase a separate long-term care rider or purchase a separate long-term care insurance policy altogether. The cost of long-term care insurance will typically depend on how old (or young) you are when you purchase the policy; however, expect the premiums to be on the high side. Moreover, you must use extreme caution when purchasing long-term care insurance because there are a number of ways you can end up without coverage, even if you have a policy. Some policies, for example, won’t even consider covering expenses until you have been in a facility for 100 days or more. That can leave a hefty bill unpaid. Policies also frequently have maximum coverage amounts, meaning if you remain in long-term care for a long time your policy will eventually stop covering your costs.
Medicaid, a federally funded and state administered healthcare program, does cover long-term care costs for program participants. Medicaid, however, is intended to be used by low income individuals and families, meaning you cannot qualify for benefits if your income and/or assets exceed the program limits – and the limits are low. If the value of your assets exceed the limit you will be expected to use those assets to cover your healthcare expenses first before Medicaid will step in and help. As a result, your “nest egg” could be significantly depleted in a matter of months. Transferring those assets in anticipation of applying for Medicaid is not an option either because the program uses a five year “look-back” period that calls for a review of your finances for the five year period prior to your application. Any assets transfers during that time period will likely be discounted and the value of the assets imputed back into your estate. Medicaid planning uses legal tools and strategies to prepare your estate for the time when you need to qualify for Medicaid benefits. By incorporating Medicaid planning into your estate plan you can rest assured that your hard earned assets are protected while simultaneously ensuring that you will be eligible for Medicaid when you apply at some point down the road.
For more information, please download our free report “Set the Stage for Medicaid Eligibility.” If you have additional questions about estate planning in the State of North Dakota please contact the experienced estate planning attorneys at German Law by calling 701-738-0060 to schedule an appointment.