9 Surprising Secrets About Long-Term Care and Medicaid

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Editor’s Note: This story originally appeared on NewRetirement.

Medicaid, a joint federal and state program that provides health coverage for those with low incomes, is often mentioned but rarely much explained.

Here are several things you might not know about Medicaid and your chances of needing it in the future.

1. You have a high percentage chance of winding up on Medicaid

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Someone turning 65 today has an almost 70% chance of needing some type of long-term care in their lifetime, according to the U.S. Department of Health and Human Services.

However, very few of us are ready to pay for that care. In fact, 60% of all nursing home residents are covered by Medicaid, according to the Kaiser Family Foundation.

2. Long-term care is even more expensive than you think

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Costs of long-term care vary dramatically nationwide, but Genworth’s Cost of Care survey estimates the medical annual costs of long-term care, as of 2021, to be:

  • $108,408 for a nursing home (private room)
  • $94,896 for a nursing room (semi-private room)
  • $59,484 for homemaker services
  • $61,776 for an in-home health aide
  • $54,000 for assisted living
  • $20,280 for adult day care

3. Even well-prepared retirees end up on Medicaid

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Long-term care costs are so high that it is not uncommon for retirees who have hundreds of thousands of dollars saved for retirement to still need Medicaid in the years before they die.

The total costs incurred by an individual will vary depending on the length of time long-term care is required.

According to the Center on Budget and Policy Priorities, the bulk of entitlement program spending — including Social Security, Medicare, Medicaid, unemployment insurance, SNAP and similar programs — goes to the middle class. These are not programs that are for the poor. Fifty-eight percent of all entitlement spending (Social Security, Medicare and Medicaid) is for payments to the middle 60% by income of the U.S. population.

4. Need for services will double, and the U.S. is not prepared to fund these costs

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As baby boomers retire, record numbers of retirees are expected to require long-term care services and also qualify for Medicaid.

The Bipartisan Policy Center says that the number of Americans needing long-term care support is expected to be more than double by 2050. In 2010, there were 12 million needing such support. By 2050, that number will be 27 million.

This increased demand for services will strain the system. The Bipartisan Policy Center says, “States will not be able to sustain spending for long-term services and supports as baby boomers begin to need these services and supports.”

5. It is legal to manipulate your finances to qualify for Medicaid

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Qualification for Medicaid varies from state to state.

However, the basics of qualification are fairly universal. You generally qualify for Medicaid when you have run through your assets and have a lower income. It is also important to note that neither the value of your home nor your home equity generally count for qualification.

To accelerate Medicaid qualification, some retirees work with legal and financial specialists to gift money to family members, purchase annuities, put money into different kinds of trusts and do various other tricks to shield assets from being part of the Medicaid calculations.

Sometimes these strategies need to be deployed years and years ahead of applying for the Medicaid program.

6. Medicaid planning is an industry

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There is a cadre of lawyers, consultants and advisers who help retirees manipulate their finances so that they can qualify for Medicaid and avoid spending their own money on assisted living or other long-term care options.

7. Some consider it unethical to manipulate finances to qualify for Medicaid

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There is significant debate about whether or not it is ethical to manipulate your own finances to qualify for Medicaid sooner rather than later.

  • Those against it say that manipulating finances in order to qualify for Medicaid is akin to fraud.
  • Those in favor say that it is no different from using the tax code to minimize payments to the government.

K. Gabriel Heiser is a lawyer and author of a book that outlines Medicaid planning strategies.

The New York Times interviewed him and said: “He’s heard from colleagues over the years who wanted no part of this work. This confused him, he said in an interview this week, given that many of them handled estate planning for wealthier clients. There, they helped people avoid paying millions to the government, whereas Mr. Heiser’s work merely helps clients get the government to pay a few hundred thousand for care on their behalf.”

8. It can be difficult to financially qualify for many long-term care facilities — with or without Medicaid

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Not everyone knows that you must pass a financial assessment to be admitted into many long-term care facilities.

These homes want and need to know that you have the financial resources to pay for their services now and well into the future.

And many homes do not accept Medicaid at all — the funding from Medicaid does not nearly cover their costs.

9. If you use Medicaid, officials may tap your estate after your death

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Another big secret about Medicaid is that if you received it, state officials can go after your estate after your death for repayment of services. This is called “estate recovery.”

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