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Long-term Care Q & A

By: Financial Hotline
Winter 2023 (Vol. 40, No. 4)

Q: I am 62 and my wife is 58. We are healthy but starting to worry about the possibility that the cost of long-term care could deplete all our assets in the future. long-term care insurance premiums were out of our budget at $1953 per month for a policy with many restrictions and limitations. Should we consider Medicaid Planning?

A: The American Counsel of Aging provides a Medicaid Eligibility Test on their website at Take the test. If you don’t qualify, it may be a good idea for you to consider Medicaid Planning. The basic idea is to align your assets and income in such a way that if the time comes that you need long-term care, you will qualify for Medicaid to pay for it.

This is one area where it may be difficult to tackle the details without professional help. Medicaid eligibility rules vary greatly by state and the application is time consuming. Making one mistake can cause costly delays. Medicaid Planners help clients structure their financial resources and prepare documentation to ensure the greatest possibility of being accepted into the Medicaid program. They create trusts, manage asset transfers, and convert countable assets into exempt assets to ensure eligibility and preserve a family’s resources. They can also protect a family home from Medicaid recovery or help couples manage finances to ensure a non-applicant spouse has the income and assets they need to live comfortably while the Medicaid recipient is in care.

Q: Who is eligible for long-term Medicaid?

A: Requirements vary by state and are subject to change. However, currently, in many states, one Medicaid eligibility factor is that a single applicant cannot own more that $2,000 in assets. A ‘countable’ asset doesn’t include exempt assets such as a personal residence or car.

If the applicant has countable assets between $2,000 and $15,000 (or $30,000 if married), they may have the option to spend down those assets or transfer funds to an irrevocable funeral trust. For example, you can use any funds you have over $2,000 to pay off your house or credit card debt, or even prepay for your funeral and all the associated expenses. Medicaid will no longer consider that money a “countable asset” and they are no longer over the Medicaid limit. If you still have assets left after spending down, your planner may recommend an irrevocable asset protection trust.

Meeting maximum income requirements is another factor. The average maximum income is $2,742 per month. If your income is over the limit, your planner may recommend a qualified income trust that will help you protect your loved ones while also allowing you to get the care you need.

In addition, Medicaid has a look back period of 5 years in which all asset transfers immediately preceding one’s Medicaid application date are scrutinized to ensure none were given away or sold for less than fair market value. There are two exceptions. California has a 2.5 year look back period, and no earlier than March 31, 2024, New York will implement a 2.5 year look back period for long-term home and community-based benefits. If this “look back” rule has been violated, persons are penalized with a period of Medicaid ineligibility. Florida and New York are the only 2 states that allow ‘spousal refusal’. The spousal refusal law asserts that non-applicant spouses are entitled to retain their assets by refusing to make them available to their applicant spouse. The ‘refusal’ strategy allows the Medicaid applicant to transfer assets to a non- applicant spouse with no look back period.

Q: How Much Does Medicaid Planning Cost?

A: The average cost of working with a Medicaid planning professional is generally less than the cost of one month’s care in a nursing home. The American Council on Aging website is a great resource for the types of Medicaid Planners and their associated fees.

Q: Are there any other options I should consider?

A: You may also want to see if your state offers a long-term Care (LTC) Partnership Program. LTC Partnership Programs are a collaboration between a state’s Medicaid program and private long-term care insurance companies. The policy does not pay your healthcare costs directly like traditional insurance, however Medicaid applicants who participate in Partnership programs can retain assets above and beyond the limits set forth by Medicaid.

These programs protect all, or a portion, of an elderly individual’s assets from Medicaid’s asset limit should they require long-term care Medicaid. This means any assets above and beyond the $2,000 limit are protected and do not have to be ‘spent down’ or transferred for qualification purposes. The exact amount that is protected is based on the amount a senior’s partnership policy has paid out for long-term care. These programs are also available nearly nationwide. The exceptions are the District of Columbia, and the states of Alaska, Hawaii, and Mississippi. To find out more, contact your state’s Department of Insurance. Note that many partnership programs have state specific names, such as the Indiana long-term Care Insurance Program (ILTCIP), the New York State Partnership for Long-Term Care (NYSPLTC) Program, and the Arizona long-term Care Partnership Program.

Asset protection extends to Medicaid’s estate recovery program, in which a state attempts reimbursement of funds paid for long-term care following the death of a Medicaid recipient. (All states have an estate recovery program). One’s home is often the only remaining asset of any value, and it is through this asset that the state usually attempts to be reimbursed. To be clear, while one’s home is usually exempt from the asset limit, it is not exempt from estate recovery. Through participation in a LTC Partnership Program, a Medicaid recipient can declare their home as a “protected” asset, protecting it from Medicaid’s estate recovery.

Another option is using the services of a Life Resource Planner, also known as Eldercare Resource Planners. These professionals offer an alternative to traditional Medicaid planning. They take a more personalized, all-encompassing approach. A long-term care plan is part of that process. Their goals include helping you identify government income and care support programs, protecting your assets, assisting with health, medical care and final arrangement decisions as well as helping you maximize family and community support.

Q: What happened to the federal program for government employees and military personnel?

A: The Federal long-term Care Insurance Program (FLTCIP) provided long-term care insurance for most Federal and U.S. Postal Service employees and annuitants, active and retired members of the uniformed services, and their qualifi ed relatives were eligible to apply for insurance coverage under the FLTCIP. As of December 19, 2022, individuals not currently enrolled may not apply for coverage, and current enrollees may not apply to increase their coverage. The suspension will remain in effect for 24 months, unless OPM issues a subsequent notice to end or extend the suspension period. Coverage will not change for current policy holders as long as premiums are paid.