If you work for at least 10 years and pay FICA or self-employment taxes, you will qualify for Medicare coverage when you reach the age of 65 under current laws. Many people are under the impression that they will be in the clear when it comes to health care expenses after they enroll in the Medicare program. In reality, this is not the case at all. There are out-of-pocket expenses for things that are covered, including co-payments, deductibles, and monthly premiums. You should do the research and gain an understanding of what you can expect so that you can budget accordingly when you are planning for retirement.
These expenses can be somewhat significant, but most people can manage them. This being stated, there is one enormous gap in Medicare coverage that a lot of people are not fully aware of until it is too late. Medicare will not pay for a stay in an assisted living facility or a nursing home, and it will not pay for in-home care. If you are thinking that it’s okay because it is likely that you will be able to take care of your own day-to-day needs throughout your life, you should understand the facts.
The United States Department of Health and Human Services maintains a very useful website called longtermcare.gov. You would do well to check it out if you are interested in preparing for the eventualities of aging. According to the site, seven out of every 10 people that are turning 65 on any given day will eventually need long-term care. Many of them will ultimately reside in nursing homes.
The widespread nature of Alzheimer’s disease is something that you should understand as well when you are considering the matter of long-term care. Approximately 40 percent of people that are at least 85 years of age have contracted Alzheimer’s disease, and it impacts one out of every eight people that are 65 years of age and older. The oldest segment of the population is aging very rapidly, and if you live until you are 67, it is likely that you will live into your 80s and perhaps beyond. Clearly, people in this age group often require nursing home care, whether is because of Alzheimer’s disease are for some other underlying reason.
What’s the Solution?
Now that we have set the stage with the necessary background information, we can answer the question that serves as the title of this blog post. Medicaid is a federal/state government program that will pay for a stay in a nursing home, and there is a part of the program that will pick up the tab for in-home care. You are probably aware of the fact that Medicaid is intended for people with sparse financial resources. There is a $2000 limit on assets, but some things that you may own are not counted.
A home is not a countable asset, but there is a $572,000 equity limit in Michigan in 2018. There is no equity limit at all if a healthy spouse will be remaining in the home. One vehicle that is used as a primary source of transportation is not counted, and wedding rings, engagement rings, and heirloom jewelry are not countable assets. Burial plots are not counted, and applicants can maintain possession of personal effects and household items.
When it comes the assets that are counted, you could give them to loved ones that would be inheriting them after your passing. This is called a Medicaid spend down. However, you have to act in advance, because there is a five-year look back period. If you give away assets within five years of the submission of your application, it will be denied, and your eligibility will be delayed.
The duration of the penalty will depend upon the amount of the divestitures as they compare to the cost of long-term care in the state of your residence. For example, let’s say that the average charge for a year in a nursing home in Michigan is $90,000. You give away $180,000 within this 60 month look back period, which is enough to pay for two years of nursing home care. Under these hypothetical circumstances, your Medicaid eligibility would be delayed by two years.
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