When you are looking ahead toward your retirement years, you may have no worries about health care insurance because you will qualify for Medicare when you reach the age of 65. Without question, this government health insurance program that is largely intended for senior citizens will provide a solid underpinning.
This being stated, the program does not pay for everything in full. It is important to understand what you have to pay out of your own pocket when you are devising a retirement plan.
Medicare Part A
The portion of the program that pays for inpatient hospitalization is Medicare Part A. Most people are not required to pay any premiums for this coverage. However, if you did not work and pay FICA or self-employment taxes for at least 10 years, there is a premium. If you did not pay Medicaid taxes for at least 30 quarters, the standard premium in 2019 is $437 a month. It would be $240 a month if you paid taxes for 30-39 quarters.
There is a $1364 deductible per benefit period for Medicare Part A, and you have to pay coinsurance if you stay in the hospital for more than 60 days. For days 61 through 90, you would be charged $341 a day. If you stay beyond 90 days, you are looking at a co-payment of $682 a day.
Medicare Part B
Part B helps to pay for visits to doctors and outpatient care. The premium in 2019 for the majority of people is $135.50 a month, but it could be higher if you earn a significant amount of income. There is a relatively modest deductible of $185 per year. That’s the good news, but the bad news is that you must absorb 20 percent of the expenses that are covered by Part B.
Medicare Part C
You can use Part C to apply your Medicare benefit to the purchase of health insurance from a private provider. This can fill in some of the out-of-pocket gaps, and there can be services available that are not covered by Medicare.
Medicare Part D
The final piece to the Medicare puzzle is Part D, which is the prescription drug component. Out-of-pocket expenses include premiums, deductibles, co-payments, and coinsurance.
Long Term Care
It is not the most pleasant thing in the world consider, but you may require assistance with your activities of daily living at some point in time. In fact, seven out of 10 people that are turning 65 on any given day will eventually need long term care. Many individuals will ultimately spend time in nursing homes and/or assisted system living communities toward the end of their lives.
Since most elders will need living assistance, it would be logical to assume that Medicare will help with these costs. In fact, this is not the case. The Medicare program will pay for convalescent care, but it does not cover long term custodial care that does not lead to a recovery.
This gap in the coverage is extremely significant, because long term care facilities are very expensive. According to Genworth Financial, in the Detroit area where we practice law, the median charge for a private room in a nursing home in 2018 was $10,798 per month. If you multiply this by the 12 months in a year, the figure is $129,575.
When you are evaluating the impact, if you are married, your family should be prepared for two rounds of nursing home expenses. Ultimately, nursing homes may consume all or most of the legacy that you have always intended to pass along to your loved ones.
What can you do about this long term care conundrum? Medicaid is another government administered health care insurance program. It will pay for long term care if you can gain eligibility. However, it takes careful planning, because there is a $2000 limit on countable assets.
When you hear about this limit, you can simply resolve to give gifts to your loved ones when and if you want to apply for Medicaid to pay for a stay in a nursing home. This makes sense on the surface, but there is an obstacle that has been put into place to prevent reactive divestitures.
All gift giving must be completed at least 60 months before you submit your application. This is called the look-back period. Your eligibility is delayed if you violate this rule. The length of the period of ineligibility would depend on the amount of the gifts. For example, if you gave away enough to pay for two years of nursing home care, you would be ineligible for two years.
Attend a Free Seminar!
Our Macomb Medicaid planning attorneys are holding a series of seminars in the near future, and you are invited to attend the session that fits into your schedule. There is no admission charge, and you can reserve your seat right now if you visit our estate planning and elder law seminar page.