It’s the topic most of us prefer not to dwell on – the inevitable progression of age and the potential need for nursing home care. However, acknowledging the reality early and preparing for it can make the process a lot less stressful.
Here’s a hard fact: according to the U.S. Department of Health and Human Services, about 70% of people turning 65 will require some type of long-term care during their lifetime. Now here’s the harder fact: Medicare, the health insurance program for seniors, doesn’t cover long-term nursing home care.
Before you panic, take a deep breath because there is a solution in the form of a Medicaid trust.
Why Doesn’t Medicare Cover Nursing Home Care?
You might be scratching your head, wondering why Medicare, the program specifically designed to aid seniors with health costs, doesn’t cover long-term nursing home care. Isn’t that one of the significant health needs for seniors?
The answer lies in the difference between medical necessity and custodial care. Medicare will cover medically necessary care; that is, treatments prescribed by a doctor to address specific medical conditions. However, nursing home care often falls under the category of custodial care, which includes assistance with everyday tasks like eating, dressing, and bathing.
Despite the essential nature of this type of support, Medicare does not consider it a medical necessity, and therefore it falls outside of their coverage.
The Cost of Nursing Home Care: A Stumbling Block for Many
The unfortunate truth is that nursing home care is expensive. As of 2021, the median annual cost for a semi-private room in a nursing home in our area was nearly $159,000, and a private room was around $180,000 according to Genworth’s Cost of Care Survey. With such exorbitant costs, affording nursing home care can seem insurmountable for many.
However, while Medicare isn’t an option, Medicaid eligibility can provide the answer.
The Solution: A Medicaid Trust
For many seniors, a Medicaid trust is an invaluable tool to qualify for Medicaid’s long-term care benefits without losing their hard-earned assets. This would be an irrevocable trust, so when you fund it, those assets would no longer be yours in a legal sense. They become the property of the trust.
As a result, they would not count if you applied for Medicaid. In the meantime, you can accept distributions of the trust’s earnings, but you cannot access the principal. A lot of people rely on the income that is earned from their savings, and if you are one of them, you wouldn’t be spending the money anyway.
This can all work out well, but establishing a Medicaid trust isn’t a last-minute solution. You need to set up the trust at least five years before applying for Medicaid due to the program’s look-back period. This period is designed to prevent seniors from suddenly offloading assets to qualify for aid.
Home Ownership
We should share some key information about Medicaid eligibility and home ownership. Your home is not considered to be a countable asset if you apply for Medicaid (with a $1.071 million equity limit). That can sound like a good thing, but there is a downside.
Medicaid is required to seek reimbursement from the estates of beneficiaries after they pass away. If your home is in your direct personal possession at the time of your passing, it would be within reach of the program during the recovery phase.
However, if you convey the home into the trust, it would be the property of the trust. As a result, it would be protected from Medicaid estate recovery.
We Are Here to Help!
If you are ready to work with a Glastonbury or Westport, CT elder law attorney to develop a plan for aging, we can help. You can send us a message to request a consultation appointment, and we can be reached by phone at 860-548-1000.
Mr. McCann is licensed to practice before the courts of the State of Connecticut. He is a member of the American Academy of Estate Planning Attorneys.
Mr. McCann provides to his clients, trust and estate planning, and trust and estate administration services. Formerly, Mr. McCann was an adjunct professor of economics in the State of Connecticut Community College system, and a Commissioner of the Town of Simsbury Zoning Board of Appeals.