Nursing home care can be prohibitively expensive for most families. On average, nursing homes cost around $70,000 annually as of 2011, according to Helpguide. Medicare only covers skilled-nursing home care under certain circumstances and after a qualifying event in the hospital. Medicaid, the health insurance for people with limited means, will pay. About 70 percent of nursing home residents rely on it, according to Medicare.gov. To be eligible for Medicaid, you've got to spend down your resources and assets, like your bank accounts, stocks and pension plans. But you've got to do it by the book, or you'll be penalized for it.
Make a plan to divest your assets long before you will need Medicaid coverage for a nursing home. Medicaid "looks back" five years for most people when determining eligibility. If you've given away assets to family members to avoid paying for nursing home care, your state will penalize you by extending the time in which you are not eligible for coverage. You also can't sell your stuff cheaply; this can be called "fraudulent conveyance." Any transfer of your property for less than fair market value will raise red flags.
Research the laws of Medicaid. Know that, for the purposes of Medicaid, you can keep your home and $2,000 in other assets as of 2011. Your home is considered exempt as long as your surviving spouse or dependent children live there. If that's not the case, some elder care law specialists encourage you to sell or transfer your home to an irrevocable trust. This is because when you die, Medicaid will place a lien on your home to recoup some of its investment in your care, which leaves you with less to leave to your loved ones.
Talk with lawyers, financial advisers and insurance counselors to make informed decisions, especially about the timing of your divesting. Just like there are assets, such as your home, considered exempt from being counted by Medicaid, there are also state laws designed to protect a non-institutionalized spouse from being impoverished by your need for nursing home care. Spend down your assets by using your money on other exempt areas. Prepay for your funeral expenses, for example. Pay off your mortgage. Make repair home repairs or replace an old automobile.
Prepay your nursing home care costs. This is an acceptable spend-down tactic. Because it lowers the burden on the state, your paying ahead also protects any uncounted assets the state may pursue after your death. You can also pay for more care at home before going into a nursing facility.
Some insurance companies let you use your life insurance policy to pay for long-term care. Ask your insurance agent if yours does and how it works. In addition, you can get free health insurance counseling from your State Health Insurance Assistance Program. There may be other coverage options besides a convalescent home, such as the Community Living Assistance Services and Supports Program, which aims to help you live independently for as long as possible.
Not all nursing homes accept Medicaid. Many people have to move out of state to get into a covered facility. Factor the traveling your spouse and relatives have to do when divesting.
- Center for Medicare & Medicaid Services: Your Guide to Choosing a Nursing Home
- HelpGuide: A Guide to Nursing Homes
- ElderLawAnswers: Medicaid Planning
- Medicaid.gov. "Program History." Accessed August 3, 2020.
- Laura M. Krohn. "Laura M. Krohn, Elder Law Attorney, Inc." Accessed August 3, 2020.
- Medicare.gov. "Skilled Nursing Facility (SNF) Care." Accessed August 3, 2020.
- Medicare Advantage. "The 5 Qualities Shared by Top Medicare Supplement Insurance Companies." Accessed August 3, 2020.
- Medicare.gov. "Medicare Advantage Plans cover all Medicare services." Accessed August 3, 2020.
- Medicaid.gov. "Eligibility." Accessed August 3, 2020.
- MSLegalServices.org. "Medicaid." Accessed August 3, 2020.
- New York State Department of Health. “Medicaid in New York State.” August 3, 2020.
- American Council on Aging. "How to Spend Down Income and/or Assets to Become Medicaid Eligible." Accessed August 3, 2020.
- American Council on Aging. “Medicaid Coverage of Nursing Home Care | When, Where and How Much They Pay.” August 3, 2020.
- Centers for Medicare and Medicaid Services. "Important Facts for State Policymakers: Deficit Reduction Act," Pages 1-2. Accessed August 3, 2020.
- Centers for Medicare and Medicaid Services. "Important Facts for State Policymakers: Deficit Reduction Act." Accessed August 3, 2020.
- Medicaid.gov. “Estate Recovery.” Accessed August 3, 2020.
Angela Ogunjimi has been a prize-winning writer and editor since 1994. She was a general assignment reporter at two newspapers and a business writer at two magazines. She writes on nutrition, obesity, diabetes and weight control for a project of the National Institutes of Health. Ogunjimi holds a master's degree in sociology from George Washington University and a bachelor's in journalism from New York University.