Retirement planning should involve budgeting for future medical expenses. But before you can do that, you should understand the basics of Medicare and Medicaid when you are engaged in your retirement planning efforts. As our nursing home attorneys understand, there are certain necessary components that should be included in your retirement planning in order to be prepared for the possible need for long-term, nursing home care.
What are Medicaid and Medicare?
These are both health insurance programs that are run by the government. People are sometimes confused about these two programs because they sound quite similar to one another, and for the most part, they accomplish the same objectives. Our nursing home attorneys will provide clarity in this blog post.
The specifics on Medicare
Medicare is the government health insurance program that is available to senior citizens who have earned sufficient retirement credits. You accumulate retirement credits when you pay FICA or self-employment taxes. The maximum accrual is four credits per year, and you need 40 credits to qualify for Medicare coverage when you reach the age of 65.
The Medicaid Program
Medicaid is a health insurance program that is jointly administered by the state government along with the federal government. Because of the fact that each state is involved with the administration of its own Medicaid program, there are some slight differences in the regulations from state to state.
What are the differences between the two programs
One difference between Medicaid and Medicare is the fact that Medicaid is a program that is available to people based on their financial need. You don’t have to earn eligibility through the accrual of retirement credits. There is an asset limit of $2000. If your assets exceed this amount, you cannot qualify for Medicaid.
Determining countable assets under Medicaid
However, it is important to understand the fact that everything that you own is not considered to be countable by Medicaid administrators. Certain personal effects are not counted, and a single transportation vehicle would not be counted either.
The value of your wedding ring and your engagement ring would not count when Medicaid officials determine your eligibility status. You may also have up to $1500 worth of whole life insurance, and unlimited term life insurance is allowed. One very big possession that does not count is your home, but there is an equity limit. The exact amount of this equity limit is subject to change.
Medicare, Medicaid, and Long-Term Care
You may wonder why you would care about Medicaid if you are going to be eligible for participation in the Medicare program. This certainly makes sense, because you don’t need two different insurers. The reason why many seniors who qualify for Medicare ultimately wind up receiving Medicaid coverage is because Medicare will not pay for a stay in an assisted living community or a nursing home.
This is a very significant factor to consider when you are planning ahead for your senior years. The first thing you should understand is the fact that it is likely that you will indeed need long-term care at some point in time. The United States Department of Health and Human Services states that most senior citizens will require living assistance eventually.
How expensive is nursing home care
You may be someone who is used to paying his or her own way. This is admirable, but when it comes to long-term care you simply may not have the necessary resources. In the state of New York, the average nursing home stay (2.5 years) is going to cost in excess of $350,000 using current prices as a barometer. This is an average; some people incur long-term care expenses that are well in excess of $350,000. The majority of seniors who are residing in nursing homes are in fact enrolled in the Medicaid program, even though the upper asset limit is just $2000.
What about “spending down?”
“Spending down” is often engaged in when people want to qualify for Medicaid to pay for long-term care. The term is more or less self-explanatory. You spend or give away assets intentionally knowing that you are trying to bring your total countable assets under $2000 in value.
This takes some very careful advance planning because the Medicaid program does not want people giving away assets after they decide that they need long-term care. To prevent this there is a five-year look back period. You cannot give away assets within five years of applying for the program without being penalized.
If you have questions regarding nursing homes or any other elder law matters, please contact the experienced attorneys at the Law Offices of Mary A. Miller, P.C. for a consultation. You can contact us either online or by calling us at (914) 939-6565. We are here to help!
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