The Deficit Reduction Act of 2005 with its five-year look-back put a big dent in Medicaid planning for long-term care. But there are still plenty of options for preserving income and retaining assets.
It can happen to anyone. A lifetime of savings can be wiped out by a catastrophic illness or an extended stay in a nursing home. With the national average for nursing home care around $80,000 per year for a semi-private room and $90,000 for a private room, it's easy to see how a family's savings can quickly disappear. Once assets are depleted, Medicaid can step in to cover the health-care costs.
Medicaid is a joint federal and state program to provide health care for people with very low income and is the largest payer of nursing home costs in the U.S. Eligibility requirements vary from state to state, but federal standards and guidelines must be followed, and both medical and financial criteria must be met.
The financial criteria are set by the states, but in general, the maximum monthly income of the institutionalized person must be less than $2,094 to meet the income test, and countable assets cannot exceed $2,000. Countable resources include cash or property that a person owns or has the authority and power to convert to cash in order to pay bills.
The planning opportunities come into play with exempt resources and the spousal share of assets. Each state compiles a list of exempt assets, which typically includes:
> The home and contiguous property, if married. If not married, there is a limit to the exemption based on the amount of equity in the home and length of stay in the nursing home.
> One automobile, regardless of value.
> Prepaid burial plots and contracts.
> Term life insurance.