It can seem as though the system is set up to make sure that your bases are covered during retirement if you do your part. Social Security will provide some monthly income, and Medicare will serve as a source of health insurance.
In some ways, this arrangement is effective, but you should understand all the facts so you do not make overly rosy assumptions about the extent of Medicare coverage.
Out-of-Pocket Costs
There are some significant out-of-pocket costs that go along with Medicare coverage. Part A is the hospitalization portion of the program, and there is no monthly premium, but there is an inpatient deductible of $1484 in 2021.
This covers the first 60 days of hospitalization, but there are daily coinsurance payments for stays that exceed this duration. For days 61 through 90, the coinsurance is $371 a day.
You are also entitled to 60 lifetime reserve days for stays that are longer than 90 days, and the coinsurance is $742 a day.
Part B covers bills that you get from doctors and other healthcare providers, and the standard monthly premium is $148.50 this year. There is a modest deductible of $203, but you have to pay 20 percent of the covered expenses yourself.
Medicare Part C give you the ability to apply your benefit to the purchase of a Medicare Advantage Plan that bundles the different segments, and Part D is the prescription drug portion.
Depending on the plan, you have to pay some combination of deductibles, premiums, and coinsurance for Part D.
Long-Term Care
The majority of senior citizens will require some type of living assistance. According to the United States Department of Health and Human Services, about half of people who are 65 and older will need paid long-term care services at some point.
Medicare does not pay for the custodial care that many seniors need, and this presents a significant challenge because long-term care is very expensive. Paying the expenses yourself late in your life can be financially devastating, and your legacy could be severely damaged.
Medicaid Eligibility
Medicaid will cover long-term care if you can become eligible, and the majority of seniors in nursing homes are enrolled in the program. This is a need-based health insurance benefit so you cannot qualify if you have significant assets in your name.
The limit is $2000, but your home is not counted with an equity ceiling of $603,000 in 2021. This can be reassuring, but you have to take steps to protect against Medicaid estate recovery, which gives Medicaid the right to reimbursement from assets in your estate.
Spending Down
To qualify for Medicaid to pay for long-term care, you can engage in a “spend down,” which will include some combination of spending assets on your needs, converting assets to Medicaid-exempt assets, and gifting to loved ones. For those looking ahead, you could alternately convey assets (including your home) into an income only Medicaid trust for greater protection.
If you establish the trust, you would be able to receive distributions of the earnings until you apply for Medicaid, but you would not have access to the principal.
You cannot find out that you need long-term care today, fund a trust tomorrow, and qualify for Medicaid next week. There is a five-your look-back period so you have to complete the transfers to the trust at least five years before you apply for coverage. (The trust may be effective even if you need long-term care less than five years after creating the trust, but you have to be able to wait five years before applying for assistance.)
Schedule a Medicaid Planning Consultation!
All this can sound like a lot, but if you work with an attorney from our firm, we can help you develop a strategy that will lead to Medicaid eligibility at the right time. You can schedule a consultation at our office in Ashland, Kentucky if you call us at 606-324-5516. Our Florence, Kentucky office can be reached at 859-372-6655.
The number in Charlotte, North Carolina or Huntersville, North Carolina is 704-944-3245. You can also use our contact form if you would rather send us a message.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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