rjp estate planning

Medicaid & Long-Term Care Planning

RJP Estate Planning | An older couple sitting on a sailboat at sunset.
Arizona Elder Law

Elder law is another aspect of estate planning, focusing primarily on the needs of families and individuals as they age. Issues of aging include senior housing and home care, long-term (or nursing home) care, guardianships and health care documents, Medicare and Medicaid.

Senior Housing & Long-Term Care Options
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As our population ages, more and more of us confront elder law-related issues, whether for ourselves or our parents. One of the most pressing issues is long-term nursing home care, which usually is not covered by traditional health insurance. Depending on where you live and the level of care needed, nursing home care can cost from $35,000 to $150,000 a year. The average stay is slightly more than three years. Most people end up paying for nursing home care until their personal (or family) assets are depleted, then they may qualify for Medicaid to pick up the cost.

Careful planning, however, can help protect your assets, whether for your spouse or for your children. The belt-and-suspenders approach is to purchase long-term care insurance while you are healthy enough to qualify, and to make sure you receive the benefits to which you are entitled under Medicare and Medicaid.

Clients are frequently confused over the differences between Medicare and Medicaid. Though their names are very similar, the programs are quite different. Medicare is an entitlement program, a federal health insurance program in which most people enroll when they turn 65 years old. There are no financial qualification rules. Medicare has two primary parts: Part A and Part B.

Medicare Part A covers in-hospital care, extended care after a hospital stay, some home health care services, and hospice services. The rules for nursing home coverage are very strict and, in fact, Medicare pays for less than 9 percent of nursing home care in this country.

Medicaid, is a joint federal-state program, subject to certain federal requirements, each state implements its own regulations on how the program is managed. Medicaid is not an entitlement program like Medicare, but rather a form of welfare. Medicaid eligibility is determined after the proper application is submitted to the state. There are many Medicaid insurance programs available in Arizona, from basic medical coverage to nursing home programs.

The Arizona Division of Aging and Adult Services provides a wealth of information for seniors and care givers.

We assist seniors and their families in making the tough decisions regarding long-term care planning, including whether Medicaid eligibility may be an option.

Helping a parent move to senior housing can seem more intimidating than orchestrating a rocket launch. The death of a spouse, declining health or safety concerns can trigger the need to move. The first phase comes with the realization that what has been home is no longer suitable. Emotional ties to a place are hard to overcome. Finding a new home that is appealing and appropriate is no easy task, and neither is culling through a lifetime’s accumulation of “stuff.”

Here are some tips to help make the transition easier:

- Plan ahead. Don’t wait for a health crisis to start the process. The smoothest transitions occur when the person moving is in the driver’s seat.

- Get a full assessment of the current situation. Physical care needs and financial resources are where to start. Consider the costs of staying in place, including renovation and ongoing maintenance. Add the cost of rising utility bills and taxes, and don’t forget transportation and food. Make a list and decide whether it’s cheaper to stay or move to a community designed for seniors.

- Take a multi-phase approach. Seniors often take longer than a year to actually make the move.

- Fully explore new housing options. Senior living offers a broader range of options than ever before.

Medicaid Crisis Planning
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Change is life’s only constant. Sometimes these changes strike without warning. If you or a loved one has experienced a sudden illness or serious accident, you understand how abruptly everything can change. Are you or a loved one suddenly in need of nursing home care? Finding and affording quality care on short notice can be stressful and draining. We can help you determine the best options for care and how to qualify for Medicaid to help finance them.

Counting The Cost

Long-term care expenses are on the rise, and projections indicate a doubling of annual costs over the next two decades, climbing from $73,000 to $131,800, according to the American Association for Long-Term Care Insurance. As the average lifespan increases, so does the demand for extended care, with potential financial devastation for those lacking assistance. Medicaid, a joint federal and state program designed for individuals with low income and limited resources, offers substantial long-term care coverage compared to the limited provisions of Medicare. Qualifying for Medicaid can be challenging due to restrictions, but the alternative—paying for nursing home care without it—may be nearly impossible. The increasing prevalence of elder law-related issues underscores the importance of addressing long-term nursing home care, a financial challenge not typically covered by traditional health insurance. Depending on location and required care levels, nursing home expenses can range from $35,000 to $150,000 annually, with an average stay slightly exceeding three years. Individuals often deplete personal assets before qualifying for Medicaid assistance.

Effective planning can safeguard assets for spouses or children, emphasizing the dual protection provided by acquiring long-term care insurance while in good health and maximizing entitlements under Medicare and Medicaid. .

Although Medicaid requirements vary from state to state, they all share one common element: complexity. Each state specifies a maximum allowed income for individuals and couples in order to qualify for Medicaid. Also, the applicant’s total assets cannot exceed a specified amount called the Individual Resource Allowance, which is consistently very low, often less than $2,000*. Although certain possessions, like your home and automobile, are “exempted” for purposes of determining Medicaid eligibility, this figure is still alarming. If the applicant is married, the process becomes more complicated. For the recipient to qualify for Medicaid in any state, the applicant’s spouse can keep only half the couple’s assets up to a Maximum Community Spouse Resource Allowance of $119,220. So, if a couple has $119,220* in assets, they must “spend down” to all but $61,610 – $2,000 (or whatever the state Individual Resource Allowance is) for the applicant and $59,610 for the spouse – on long-term care.

What can you do if the value of your “non-exempt” assets exceeds the $119,220* Maximum Community Spouse Resource Allowance? If you give your extra assets away, which seems like an obvious choice, you will encounter greater problems. Violating this “Transfer Penalty Rule” could disqualify you from receiving Medicaid for months or years, depending on how much you gave away.

If your need for nursing home care is immediate, time is not something you can afford to lose. Why? If you wait too long and your non-exempt assets fall below the maximum $119,220 limit, then the applicant’s spouse can only keep half of what is left… with $23,844* as the Minimum Community Spouse Resource Allowance. In other words, $59,610* truly is the Maximum Community Spouse Resource Allowance!

Legally Protecting the Maximum Amount the Law Allows

This is only a brief and oversimplified review of a few Medicaid rules, of which there are myriad more. Navigating them on your own could be a nightmare at best and subject you to penalties at worst. Fortunately, though, our experienced professionals can guide you through the Medicaid maze. We can advise you throughout the application process, ensuring that you retain the maximum income and total assets allowed by law.

*Since these amounts (e.g., the “Community Spouse Resource Allowance,” etc.) are adjusted annually, these numbers may vary slightly depending on when the most recent figures are released.

Navigating the Complexities of Medicare and Medicaid

It's common for clients to grapple with the distinctions between Medicare and Medicaid, given their strikingly similar names. However, these programs diverge significantly. Medicare, an entitlement program, serves as a federal health insurance initiative for individuals aged 65 and older, with no financial qualification rules. Comprising Part A and Part B, Medicare covers in-hospital care, extended care post-hospital stays, select home health services, and hospice services. Notably, it falls short in covering nursing home care, contributing to less than 9 percent of such costs nationwide.

On the other hand, Medicaid operates as a joint federal-state program, each state implementing its regulations. Unlike Medicare, Medicaid is not an entitlement program but a form of welfare. Eligibility is determined by state application, offering various insurance programs in Arizona, ranging from basic medical coverage to nursing home programs.

Our commitment extends to assisting seniors and their families in navigating long-term care planning, including the complexities of Medicaid eligibility. While Medicaid requirements vary by state, complexity remains a common factor. States define maximum allowed income and total assets, with the Individual Resource Allowance often alarmingly low, sometimes less than $2,000*. For married applicants, the process becomes more intricate. To qualify for Medicaid, the applicant's spouse can retain only half of the couple's assets, up to a Maximum Community Spouse Resource Allowance of $119,220.

Addressing excess "non-exempt" assets poses challenges, with giving away assets triggering the "Transfer Penalty Rule," potentially disqualifying individuals from Medicaid for an extended period. Immediate action is crucial for those in need of nursing home care, as delay may reduce the Maximum Community Spouse Resource Allowance to $23,844. The Medicaid qualification process involves myriad rules, and navigating them alone can be daunting. Our experienced professionals offer guidance throughout the application process, ensuring you retain the maximum income and total assets allowed by law. *These amounts, such as the "Community Spouse Resource Allowance," are adjusted annually, and figures may vary depending on the most recent releases.

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