Medicaid Planning - Overview
How To Pay For The Nursing Home Without Going Broke
One of the things that concern most people about nursing home care is how to pay for that care. There are basically three ways that you can pay the cost of a nursing home:
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Long Term Care Insurance – If you are fortunate enough to have this type of coverage, it may go a long way toward paying the cost of the nursing home. Unfortunately, long term care insurance has only started to become popular in the last couple of years and most people facing a nursing home stay do not have this coverage.
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Pay with your own funds – This is the method many people choose first. Quite simply, it means paying for the cost of a nursing home out of your own pocket. Unfortunately, with nursing home bills averaging around $5,000.00 to $8,000.00 per month in our area, few people can afford a long term stay in a nursing home.
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VA Assistance - Roughly one-third of the population over eighty years of age either served in the military or is a surviving spouse of someone who served in the military. VA special pensions can help to pay the nursing home bills. Please contact an accredited attorney for more information on VA special pensions.
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Medicaid – This is a primarily federally-funded and state-administered program which pays for the cost of the nursing home if certain asset and income tests are met.
Since the first two methods, (long term care insurance and paying with your own funds) are self-explanatory; we’ll concentrate on Medicaid and Medicare and on the preservation of assets.
What About Medicare?
There is a great deal of confusion about Medicare and Medicaid.
Medicare is the federally-funded health insurance program primarily designed for older individuals (i.e., those over age 65). There is a limited long-term care component to Medicare. In general, if you’ve had a hospital stay of at least three days, and then you need to go into a skilled nursing facility (often for rehabilitation), then Medicare may pay for a while.
Typically, in that circumstance, Medicare will pay the full cost of the nursing home stay for the first 20 days and will continue to pay the cost of the nursing home stay for the next 80 days, but with a deductible that’s about $133.50 per day. In order to qualify for these 100 days of coverage, however, the nursing home resident generally must continue to “improve.”
While it’s never possible to predict at the outset how long Medicare will cover the rehabilitation, from our experience it often falls far short of the 100 day standard. But even if Medicare does cover the 100 day period, what then? What happens after the 100 days of coverage have been used?
At that point, you’re back to one of the other alternatives... long term care insurance, or paying the bills with your own assets, or Medicaid.
What is Medicaid?
Medicaid is a benefits program which is primarily funded by the federal government and administered by each state. So the Medicaid rules may vary from state to state.
One of the primary benefits of Medicaid is that, unlike Medicare which only pays for skilled nursing, the Medicaid program will pay for long term custodial care in a nursing home.
Custodial care refers to assistance with the activities of daily living (i.e., activities like dressing, bathing, toileting, preparing meals and so on). The inability of some older persons to manage these activities on their own often results in the need to move to a nursing home.
Why Plan for Medicaid?
As life expectancies and long term care costs continue to rise, the challenge quickly becomes how to pay for these services. Many people cannot afford to pay $5,000.00 per month or more for the cost of a nursing home, and those who can pay for a while may find their life savings wiped out in a matter of months, rather than years.
Fortunately, the Medicaid Program is there to help. In fact, in our lifetime, Medicaid has become the long term care insurance of the middle class. But the eligibility to receive Medicaid benefits requires that you pass certain tests on the amount of income and assets that you have. The reason for Medicaid planning is simple... you plan so that if you need it, you will be eligible to receive Medicaid benefits.