Medicare and Medicaid:
Expert Advice From Money Insider Jeff Fleming
If Audrey's mother has no savings or other assets, then how can she pay for nursing home costs? To answer this, a brief explanation of Medicare and Medicaid is in order.
Medicare
The Medicare program is usually the first avenue for the health care needs of America's elderly and disabled. It is a health insurance program for people 65 years of age or older and enrollment in Part A is automatic. Particularly relevant to this discussion, Part A provides basic coverage for hospital care, nursing care and home health care. Part B covers most other types of medical services including doctors' services, physical, occupational or speech therapy, outpatient hospital services and X-ray and radiation treatment.
Unfortunately, nursing home care is covered only after a hospital stay of at least three days, and then only if the patient requires daily skilled nursing care or physical, occupational or speech therapy on a daily basis. Even if it is covered, coverage is limited to 100 days, and only the first 20 days are covered in full. A co-payment is required for the remaining 80 days. Part A of Medicare also has a home health care services component that is limited to 100 visits per spell of illness and a maximum of 28 hours per week of skilled nursing and home health aide services.
Medicaid
This overview clearly illustrates that Medicare alone is insufficient to cover the costs of nursing home care. This leads us to Medicaid, which provides medical assistance for people with low incomes and limited assets. The key to qualifying for Medicaid is that you must have limited means: You must spend down nearly all of your assets before you qualify to receive Medicaid. In other words, it is part of the U.S. welfare system. Once you become eligible, however, Medicaid covers all types of medical care, including:
- Hospital care
- Doctor bills
- Nursing home coverage
- Home care
- Prescriptions
- The Medicare deductibles and many of the services not provided by Medicare, assuming you are enrolled in Medicare.
Audrey's mother may qualify now for Medicaid if she were to enter a nursing home because she has no assets other than the condo. If, as Audrey says, that condo was purchased with her money, then it could not be used to reimburse the government for Medicaid payments received. The real planning issues concern Audrey and her husband. If she admits her husband into a nursing home, Audrey cannot afford to use all of her assets for his care because that would leave her unable to take care of herself financially.
Qualifying for Medicaid
To qualify for Medicaid, an individual can have resources (other than exempt assets such as a home) of no more than $2000 in 2005. Audrey can, as a spouse remaining in the community (assuming that her husband enters a nursing home), retain significantly higher amounts of assets and still not affect her husband's Medicaid eligibility. The rules are very complicated and differ in each situation, so I highly recommend that Audrey consult with an attorney knowledgeable in this area, but I will briefly summarize the basic rules:
- At the time that application is made to a nursing home, all of the resources held by either spouse shall be considered available to the institutionalized spouse to the extent the value exceeds the Community Spouse Resource Allowance (CSRA).
- The CSRA is equal to one-half the couple's resources as of the date of institutionalization to a maximum of $95,100.
- This amount can also be increased if the spouse in the community has income (as discussed below) that is less than $2,377.50 per month and needs additional interest and dividends to bring his or her monthly allowance up to $2,377.50.
- Any assets that you acquire after your spouse becomes eligible for Medicaid will not be considered as available.
- Income received is treated as available only to the spouse whose name it is in. Income in the name of both or income that is not identified as belonging to one or the other shall be considered to belong one-half to each. The income of the community spouse is not deemed available to the institutionalized spouse.
For those thinking of ways around Medicaid reimbursement, let me warn you that it is not easy. In fact, it may even be illegal. Medicaid can look back for three years to determine whether assets were transferred for less than fair market value. If property is transferred in trust, then the lookback period can be extended to five years. These property transfers can affect the eligibility for Medicaid by an institutionalized spouse.
As I said, Medicaid rules are very complicated, and Medicaid should clearly be used as a last resort. However, it should provide Audrey with some reassurance that her mother would be provided for even though she may not be able to pay for her care herself, and that Audrey would not be financially responsible for her mother's nursing home care should it become necessary.
Expert Advice for Audrey
Protecting Assets
Long Term Care Insurance
Medicare and Medicaid
Estate Planning Documents
Elder Care Attorneys, from our sponsor, Merrill Lynch
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