Avoiding the Nursing Home Cost Crisis

Medicaid Spend Down

Many of our clients are concerned about avoiding the nursing home cost crisis.  What is the crisis?

The cost of long term medical care has the potential to consume your entire estate.  This is the nursing home cost crisis.  It could be called the Medicaid Spend Down dilemma.  Going into a nursing home is expensive.  To help cover or supplement such costs with government or taxpayer money, we have Medicaid.  Medicaid is intended for the poor.  Consequently, to qualify, you must be or become poor.   Each state sets its own criteria for qualifying for Medicaid.  As a general rule, one can have no more than $2,000 to qualify for Medicaid.  This results in the “Medicaid spend down” requirement.  There are ways you can reduce, fund, or avoid nursing home costs.

What can you do?

• Do you have Long Term Care insurance?
• Do you have a “medicaid friendly” annuity such as discussed in the article?
• Do you have Long Term Care Insurance?
• Does your LTC insurance allow you to get all of your money back (return of premium), or is it a use it or lose it policy?
• Do you have medical insurance that will cover other medical costs separate from nursing home expenses?
• Is your income from all sources sufficient that you could pay for a nursing home without spending down your assets?  (In my experience, depending on the amount and qualify of care you want, this starts at about $3,500/month and can go up from there.  $5,000/month gives you top line nursing home care.  $10,000+/month gives you private nursing anytime you’re awake.)
• If your income is not adequate, how much is the shortfall, and how long would it take to spend your net worth down to zero, and how concerned are you about that likelihood?
• Your Trust is NOT one of mine.  As discussed in our last review conference, it is adequate for avoiding probate and making distributions to the next generation.  It does not have provisions specifically aimed at avoiding or mitigating the medicaid spend down requirements, but those could be added if and when they become necessary.  Most of the solutions to the nursing home issue are financial and insurance based.

Avoiding the Nursing Home Cost Crisis

With an aging population and fewer available resources, avoiding the Nursing Home Cost Crisis is more important now than ever before.  Good estate planning will take into consideration Long Term Care costs and how to fund or Avoid Nursing Home Costs.