Medicare is a health insurance program that exists to address medical costs that are incurred by senior citizens. You gain Medicare eligibility by earning retirement credits when you pay taxes. Each year, you can get a total of four credits, and you are eligible when you have 40 credits.
The eligibility age is 65 at the present time. Even if you do not work enough to accumulate the 40 credits and if you are married, you can qualify on your spouse’s work record.
Convalescent Care vs. Custodial Care
If you need convalescent care after an injury or illness, Medicare will cover its share of the expenses. However, if you were to stay in a nursing home toward the end of your life, you and your family may be surprised to learn Medicare would not be much help in getting you on a path of recovery.
In that case, you would be receiving custodial care. Be clear, Medicare does not cover this type of living assistance. There are home health aides that provide custodial care as well, and in-home care is not covered either.
According to the United States Department of Health and Human Services, 35 percent of senior citizens will eventually reside in nursing homes. Just over half of American seniors will require some type of professional help with their activities of daily living.
Long-Term Care Costs
It is not easy to pay for a stay in a nursing home comfortably out of your own pocket. The state of Oklahoma has determined that the average daily cost for nursing home care is $179.57. If you multiply this by 365, you are looking at over $65,500 a year.
About half of the people that need long-term care are in a nursing home for a year. 13 percent accumulate these expenses for over five years. If you are married, you and your spouse may face two different rounds of nursing home bills. The expenses can be devastating.
Medicaid Eligibility
A widely embraced solution is to position your assets to qualify for Medicaid. This jointly administered federal/state government health insurance program does pay for custodial care. Since it is intended for financially needy people, there is a $2,000 asset limit. Even more daunting, you cannot have more than $2,000 in your name for five years before applying for Medicaid! These five years are referred to as the “look-back” period.
That sounds like a deal-breaker on the surface, but there are some relevant details that soften the blow. A home is not a countable asset with an equity limit of $636,000 in 2022.
Your wedding and engagement rings are not counted along with heirloom jewelry that may have been handed down to you. A car or truck is not counted, and Medicaid is not concerned about your household items and personal effects.
You may retain $1,500 to help pay for final expenses, and you can have $1,500 worth of whole life insurance. Prepaid burial plots are exempt, and you can have any amount of term life insurance.
Spousal Allowances
There are allowances for a healthy spouse who remains at home when their spouse is entering a nursing facility. One of them is the Community Spouse Resource Allowance, which is half of the countable assets up to a limit. The maximum allowance is $137,400, and the minimum is $27,480.
With the exception of a $75 a month personal needs allowance, income that is brought in by the spouse that is in a nursing home is used to help cover the costs. If a healthy spouse needs the income, the requirement is waived, and the spouse can continue to accept some, perhaps all of it.
This is called a monthly Maintenance Needs Allowance, and the maximum allowance this year is $3,435 a month.
Medicaid Estate Recovery
As we have stated, you can qualify for Medicaid as a homeowner, but it is an arrangement that should be avoided. There is a Medicaid estate recovery mandate, so the program can put a lien on the home after your death if it was in your possession at the time of your passing.
Income-Only Medicaid Trust
You can convey your home and countable assets into an income-only, irrevocable Medicaid trust with future eligibility in mind. Because of the five-year lookback period mentioned earlier, the trust must be funded at least 60 months before you apply for Medicaid.
While you are living independently, you can accept distributions of the trust’s earnings, so your income stream would remain intact. If you need long-term care at least 60 months after funding the trust, the assets will not count, and the home would be protected from estate recovery.
Take Action Today!
If you are ready to work with an Oklahoma City elder care planning lawyer to develop a plan for aging, we are here to help. You can call us at 405-843-6100 to schedule a consultation appointment, or you can use our contact form to send us a message.
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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