The costs are crushing; the burdens on our loved ones enormous.

A Certified Elder Law Attorney can help ease those costs and burdens. This article will discuss three techniques that elder law attorneys use to help families protect themselves against the financial cost of long term nursing home care once the need for that care has arisen. These strategies are just three of many planning techniques that are available.  part of the planning arsenal that is available. Some of these techniques can be used in a crisis, but the best strategy is always to plan early, rather than wait .

The primary way that everyone pays for long term nursing home care is to use the Government Medicaid program.  The overwhelming majority of residents in nearly every nursing home in Mississippi are already on Medicaid, and almost all of those who are not will qualify in the very near future unless they pass away before all of their funds are depleted.  The techniques that I share below are available under existing laws to qualify for Medicaid before becoming completely impoverished.  These techniques can help protect the financial security of the “at-home” spouse of nursing home resident, can provide families with the security that they need to ensure that they will have some funds available to keep their loved one as comfortable as possible, and can provide assurances to a distraught nursing home resident that they will have preserved something to pass along to their heirs.

WHO PAYS FOR LONG TERM NURSING HOME CARE

The average cost of nursing home care in Mississippi is now around $80,000 a year. Not many Mississippi families can afford to pay that kind of cost for long. To protect the financial security of the “at-home” spouse, or what is technically referred to as the “community spouse” (i.e. the non-institutionalized spouse) at least some of that cost must be shifted onto a third party as soon as possible.  Those potential third-party payers include Medicare, private insurance, and Medicaid.

Most seniors have Medicare, but Medicare does not pay for long term stays in a nursing facility. Medicare is designed to make you well, but it is not designed to pay for the ongoing palative care caused by a chronic illness like Alzheimers’ disease. At most Medicare will only cover 100 days of rehabilitation in an long term care nursing home, and that is only if the individual is improving.  After that, the individual is on their own to pay for their care.

Another possible payment source is long term care insurance. While standard health insurance doesn’t cover nursing home costs, healthy individuals can buy special long-term care insurance that does. But few seniors have this kind of coverage. It’s expensive and underwriting standards can be difficult to meet, and premiums have been increasing a lot in recent years. As a result most seniors do not have long term care insurance.

That leaves the Medicaid program.  Medicaid is our nation’s social safety net, and as such is the most significant potential alternative source of long-term care financial assistance for most people.   But unlike Medicare, which is an entitlement program, Medicaid is a means tested program meaning that, in order to receive benefits, an individual must have assets and income below certain limits.  The financial qualification rules for Medicaid qualification are complicated, and often can prevent a long-term care recipient from qualifying for the program. An experienced Certified Elder Law Attorney will be able to help families find their way through the qualification maze and qualify for Medicaid sooner rather than later.

Here are three techniques that elder law attorneys can utilize in the right circumstances.

USING ASSETS TO PAY OFF DEBTS AND EXPENSES

By using at risk assets to pay bills prior to applying for Medicaid assistance the community spouse can reduce demands on the assets he or she is allowed to keep under Medicaid spousal impoverishment rules. For example, a couple may elect to pay off existing debts like a home equity line of credit; to prepay real estate taxes, insurance, or other large bills; or to prepay funeral expenses.

Example: John and Susan have a home and $$150,000 of savings when John enters a nursing home for a long term stay. Under Medicaid spousal impoverishment rules, Susan is allowed to keep approximately $120,000 as her protected spousal allowance and John is permitted to retain $4,000. They have $26,000 in excess resources that prevent John from being eligible for Medicaid.

Before John is admitted into the nursing home, Susan spends the $26,000 excess by paying off the mortgage on the couple’s home, some credit card debt, and by making an advance payment of real estate taxes. Because Marian now has only $120,000 and John has only $4,000 left, John is eligible for Medicaid.

BUYING ASSETS THAT ARE NOT COUNTED BY MEDICAID

Medicaid eligibility rules do not count certain assets such as a home, a car, and personal effects. Therefore, in appropriate cases a community spouse might take money from countable savings to buy a more expensive home; repair or improve an existing home; or buy a new car, new household furnishings, or personal effects. Medicaid rules do not restrict spending countable assets on non-countable ones of equivalent value. Money spent on non-countable assets needed for the community spouse’s use can accelerate Medicaid qualification.

Example: In the John and Susan example above, after John’s admission to the nursing home, Marian could spend the $26,000 excess on a new car.  Because of this allowable spending John is now financially eligible for Medicaid.

CONVERTING COUNTABLE ASSETS TO INCOME

Some strategies are designed to convert excess assets into income for use by the community spouse. In order to avoid a Medicaid penalty the community spouse must receive something of equal value in exchange for the converted assets.

A conversion strategy that is frequently used for married couples involves annuities. Annuities are contractual arrangements in which an individual pays a lump sum to receive a future stream of income in return. They are offered in a bewildering variety of forms by commercial financial companies, and can involve poorly understood consequences and costs to the consumer.

Most annuities are inappropriate vehicles for Medicaid planning, but there are annuities that conform to the specific requirements of Medicaid law that can be used to protect all of a couple’s excess resources for the community spouse. Although savings are immediately and substantially reduced, the community spouse’s income is increased by a more modest but recurring amount.  The at-home spouse’s income does not disqualify the institutionalized spouse for care, and the at-home spouse can either spend that extra income or reinvest it, effectively recouping all of the assets used to purchase the annuity.

In the typical scenario, after the institutionalized spouse enters the facility, the community spouse, acting under the guidance of a Certified Elder Law Attorney, liquidates the couple’s excess countable resources and uses the funds to purchase a non-assignable, non-transferable annuity that meets all of the requirements of the Deficit Reduction Act of 2005. If done correctly, there is no transfer penalty and, since the check is payable to the community spouse, the payments received are income to the community spouse and do not impact the Medicaid eligibility determination.

However, this strategy should only be used in conjunction with an overall Medicaid qualification plan or the results can be disastrous.  For example, if the at-home spouse’s income is less than the minimum monthly maitenance needs allowance (currently around $3,000 per month) then the at-home spouse is entitled to keep their own income PLUS enough of the institutionalized spouse’s income to bring them up to the $3,000 monthly income amount.  If that same at-home spouse purchased an annuity that increased their income, every dollar of annuity payment received would reduce the monthly needs allowance by a dollar as well – in other words the strategy accomplished nothing (other than perhapse to earn an insurance agent a commission).

NOT EVERY STRATEGY IS APPROPRIATE FOR EVERY CLIENT

The above three examples are only three of the numerous strategies that can be used to unnecessarily keep assets from being used to pay for nursing home care, but not every strategy is appropriate for every client or situation.  In all but the simplest cases you need the guidance of an experienced elder law attorney.  Working with a Certified Elder Law Attorney will give you the confidence that the lawyer you are working with has the skill, knowledge, reputation and experience to advise you in this complex area. Implementing the wrong strategy, or implementing the right strategy incorrectly, can have disastrous results.  Don’t try the annuity conversion strategy without expert help from an elder law attorney who knows the rules in Mississippi inside and out. It’s easy to make a catastrophic mistake by buying the wrong annuity or an annuity that does not contain required special Medicaid provisions or which was purchased at the wrong time.