When you are engaged in your retirement planning efforts, you are clearly going to recognize the fact that you will have Medicare coverage when you reach the age of 65. This coverage will certainly be of great assistance, but you have to understand the limitations of the program.
First off, there are out-of-pocket expenses that come into play, even if you have Medicare coverage. You have to pay a deductible for inpatient hospitalization, and there can also be co-payments. In addition to this, there is a monthly premium that must be paid for Medicare Part B, which is the portion of the program that pays for outpatient care and visits to doctors.
Most people pay $135.50 per month at the present time, and this is typically deducted from your Social Security direct deposit once you become eligible for your benefit.
The prescription drug program also comes with out-of-pocket expenses in the form of deductibles, co-payments, and premiums.
The Big Gap
You should definitely budget for the out-of-pocket expenses that we have touched upon above when you are devising your retirement budget. However, there is a very big gap that you must account for as well. Medicare does not pay for long-term care, and this is a huge issue within the retirement planning community.
If you are not especially concerned because you are healthy and you feel as though you will never need help with your activities of daily living, you should understand the facts. The majority of seniors will need long-term care eventually. This figure is 70 percent according to the United States Department of Health and Human Services.
Paying out-of-pocket is not a very pleasant prospect. The average annual charge for a room in a nursing home in the state of Michigan exceeds $100,000, and people often spend multiple years in these facilities.
Many people who recognize this discuss Medicaid planning with our elder law attorneys. Medicaid is a need-based government program, and it does pay for long-term care.
Medicaid Eligibility and Your Home
The upper asset limit for an individual is just $2000, but some of your assets do not count when Medicaid is determining your eligibility. Your home is not considered to be a countable asset, but there is an equity limit. In 2019, the equity limit here in the state of Michigan is $585,000.
If a healthy spouse is remaining at home while his or her spouse enters a long-term care facility, there is no equity limit at all.
The states are required to seek recovery from the estates of people who were using Medicaid to pay for long-term care. If your home was part of your estate at the time of your passing, technically speaking, it could be targeted.
However, this is a grey area, and some states are more aggressive than others when it comes to Medicaid recovery efforts. Plus, if your spouse will remain in the home after you die, there would be no worries from Medicaid.
To account for the possibility of the home being absorbed if you do not have a living spouse, you could give it to a loved one. This being stated, you would have to do so at least five years before you apply for Medicaid, with one caveat.
If you have an adult child living with you as a primary caregiver for at least two years before you enter a nursing home, you could qualify for the Caregiver Child Exemption. If you are approved for this exemption, you could transfer your home to your child, and the five year look-back period would not apply.
Attend a Free Seminar!
Our Clinton Township Medicaid lawyers are holding a series of seminars over the coming weeks, and they are going to be chock full of useful information. As the icing on the cake, there is no admission charge, so there’s no reason to take pause. To see the schedule and obtain registration information, visit the seminar schedule page on this website.