The cost of nursing home care or 24 hour home care averages over $140,000 per year in New York City. At this rate, only the very wealthy can pay indefinitely for this care, without depleting their lifetime savings. Since most people do not have private long term care insurance to pay for this cost, seniors look to government programs to pay for the cost of long term health care. The following explains some of the differences between Medicaid and Medicare, the programs that people rely on to pay for this cost.
Difference Between Eligibility for Medicaid and Medicare
Medicare is available for those above 65 years of age and those with disabilities under the age of 65 who have received Social Security Disability benefits for 2 years. Medicare is based on one’s payments into the Social Security system, therefore eligibility is not based upon the income or assets of a beneficiary.
Medicaid is means tested, i.e. the recipient must qualify financially, both based on income and assets. In 2015, for people older than 65, the annual income threshold for a single individual is $9,900 ($14,500 for a married couple) and the asset threshold for a single individual is $14,850 ($21,750 for a married couple).
What Does Medicare Cover and What Does Medicaid Cover?
Medicare Part A covers in-patient medically necessary hospital care, skilled nursing facility care, skilled home health services and hospice care. The requirement for “skilled” is very specific, Medicare Part A will not cover nursing home care or home care if it is simple "personal care services" (feeding, dressing, etc). The fact that Medicare does not cover regular long term care comes as a surprise to many.
Medicare Part B covers physician’s payments.
Medicare Part C provides beneficiaries with alternatives to the traditional fee for service. The services are provided by various health care providers, such as Health Maintenance Organizations ("HMOs").
Medicare Part D covers prescription drugs.
Medicaid covers chronic care in hospitals, skilled nursing facilities, participating physicians’ fees and home care services. Since Medicaid covers home care and nursing home care, something that Medicare and most private insurance plans do not, Medicaid coverage becomes almost a necessity for people who are expecting to need long term home care.
What Are Countable Assets (from Medicaid’s Perspective)?
All financial accounts in one’s name are countable. Retirement plans that are in pay status do not count as assets, however the monthly distributions are counted as income. The individual’s primary residence does not count as an asset (unless the Medicaid recipient is in a nursing home, the equity in the house exceeds $828,000, and there is no spouse or disabled child living in the home).
Can One Transfer The Assets and Qualify for Medicaid?
The answer is – it depends. All transfers between spouses are exempt, therefore there is no penalty period after those transfers. Similarly, if one is applying for Medicaid while living in his home, then he can transfer the assets to his children or to a trust in one month, and become eligible for Medicaid during the following month.
However, if one is applying for nursing home Medicaid, then Medicaid looks at all transfers made within the last 5 years of the application, and determines an ineligibility period based on the amount of assets transferred. Therefore, crisis planning is usually not very effective when it comes to nursing home Medicaid planning.
Can One Transfer All Assets to a Spouse and Qualify for Medicaid Immediately?
Yes, however, there is a maximum resource and income allowance for the “community spouse” – the spouse who remains in the community while the institutionalized spouse is in the nursing home. The community spouse may retain the home, may retain between $74,820 and $1192,20 in assets, and may retain the maximum annual income of $119,220. However, the community spouse has a legal duty to support the institutionalized spouse. Therefore, if the community spouse has the assets and the income above these thresholds, Medicaid is likely to institute a collection action, to compel the community spouse’s support.
In general, Medicaid seeks contribution of 25% of the excess income, but may seek up to all excess assets. It is generally advisable to convert the excess assets into an income stream. However, as there may be a dispute about how much of an income is “excess”, unintended consequences may result, with nursing homes filing guardianship actions to compel additional payments.
One should also think about the future of the second spouse. Generally, spouses are close in age. If one of the spouses currently needs home care or nursing home care, it is likely that the second spouse may need similar type of care in a few years. Therefore, planning for the second spouse is also advisable. Transferring all assets to a ‘community spouse’ may solve the immediate crisis and is not a good long term solution.
This article only offers general information. Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions. As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney client relationship.