A public service message to you and your parents about Medicare & Medicaid

If you or your parents are not yet 65 you’ll probably ignore what I have to say thinking this won’t apply to me. You’ll be making one of the biggest mistakes of your life.

If you or one or someone in your family has to go into a Skilled Nursing Facility (SNF) the current cost, in North Carolina, is about $72,000 yearly. I’m going to focus on details surrounding folks who are 65 or older who qualify for Medicare. Anyone younger who needs a SNF, unless they have good Health Care Insurance that pays for some “rehab” time in a SNF, or has been smart enough to purchase Long Term Care (LTC) insurance is likely in deep financial trouble.

Let’s assume Dad falls and breaks a hip. Medicare A will pay 80% of the Medicare approved charges. Medicare B (If your parent has it) will pay for the ambulance ride and so on...but the medical bills is not my focus. The parent with the injury will likely be released to a SNF for physical and occupational therapy (rehab). If you read the Medicare documentation it says Medicare will pay 100% for the first 20 days (only after a 3 day hospital stay) and then all but about $135/day for up to a total of 100 days. If your parents have supplemental insurance that will cover the difference for those 80 days...and even all the costs for some additional period, you might think. “We’re golden for xxx days.” You’re not. Medicare only pays as long as the patient can be rehab’ed, and usually that’s a period of weeks. When the therapy folks say the patient is ready to go home, Medicare stops paying. You’re thinking...well, that seems OK....and it might be. But what if Dad has a stroke...and is confined to a wheelchair....and can’t benefit from more than a few days of rehab and Mom isn’t capable of taking care of him.

Guess what....after those few days...Dad is yours...and the bills are yours if you keep Dad at the SNF. You’ll get some “Home Health” benefits when he comes home....but not 24/7 help and not for too long. Aha, you say...I’ve heard Medicaid will pay if my parents can’t afford it. True...but only after (unless you’ve done the proper prior planning with an “Elder Law” and Medicare/Medicaid knowledgeable attorney) taking 50% of everything your parents have (except their house and car) and limiting their income and having them sign over any life insurance in excess of $10K, annuities...and so on and so on...in great and complete detail requiring even such things as proof of citizenship, their parents death certificates ... you name it. If there is no surviving spouse they will take everything excluding about $2000 and their burial policy and a few other things...if they have them. A Trust won’t protect these assets. And they’ll get to keep a generous $30 a month for spending money...like for hair cuts or a soda-pop.

Aha...you say...I’ll have my parents title their home to me, give me their other assets and then they won’t have anything to give the Government. Wrong! There is a 3 going to 5 year “look back” period and any assets transferred during that time will be counted...and your parent will be disqualified from Medicaid-paid SNF for one month for every $5000 of transferred assets. They’ll want all the bank statements and other financial records.

(BTW...Assisted Living...which means things like help with medications and other fairly minimal support...and usually three meals a say...with an unfurnished studio apartment...will run anywhere from $2500 monthly upwards to whatever you can afford and is never covered by Medicare or Medicaid.)

There’s a lot more to this than I’ve said...even in this long post. I’m trying to SCARE you and your parents into doing something NOW before you HAVE to face the reality of these circumstances.

Yep...my Dad fell and he’s in a SNF now. He’s gonna be OK and so are we. We did some planning years back...maybe not all that we should have done...but enough.

Do your planning NOW. It's worth the cost.

Comments

I'm just telling you what I think I know...and without

opinion as to what these programs do or don't do and the cost to the taxpayer. I'll come back later to see if there are any really simple questions I think I can answer...but remember, I'm not an attorney and you need to get EXPERT advice.

Stan Bozarth

I hope your dad heals well, Stan

I'm glad that your family will be fine going through this. You're right to point out the need for planning - the cost of assisted living is astronomical.

G and I have purchased long term care insurance after learning about the cost of care as we share with my brothers the on-going tasks of caring for my elderly mother. We did it for each other and for our son.

5 Easy Steps

STan,
If you were to write a post called 3 Easy STeps to avoid this, what would they be? Or, 3 easy steps or 7 easy steps.My parents are getting on in age and are not in great health. Both 65+. Just curious about what the options are.

Jesus Swept ticked me off. Too short. I loved the characters and then POOF it was over.
-me

Robert, the options vary for each situation.

The best advice I can give you is to arrange for a consultation meeting with a SPECIALIZED attorney who deals exclusively in estate planning and medicaid law. The consult may be free. Go there with your parents armed with all the information about their financial situation. The attorney will tell you what needs to be done, how to do it, and his fee will come into play in the actual legal work that needs to be done to protect their assets.

If they don't do this...they can count on losing half their life savings...or all of it if both ultimately need medicaid paid SNF. Some assets are exempt (house and one car for a surviving spouse...generally speaking) but almost everything else would have to be spent down...or subject to later recovery...for medicaid to pay the SNF bill.

Stan Bozarth

Thanks.

This space for rent....no seriously, you can have my sig line to advertise your positions/goods for the right price.

Jesus Swept ticked me off. Too short. I loved the characters and then POOF it was over.
-me

The last gift my father left my mother

was Long-Term Care insurance. This pays almost all of her costs at the Assisted Living facility where she now lives. The cost there is $110 a day, and her insurance pays $100 a day. It will last until she dies. If she didn't have this insurance, she'd probably be living with me - because my brothers and I could not afford the fees, and I'm the only one who has extra room in the house. Mom requires careful monitoring because of some chronic medical conditions. I am a loving daughter indeed, but not a nurse at all, and I'm not sure I could provide the kind of care that she would need.

The sooner you get long term care insurance, the better - I think the rates are lower for younger people.

It's a shame that Medicaid/Medicare doesn't cover situations like this.

Stan is right. Plan ahead.

I don't know if this is much help

I noticed this in Pricey Harrison's last newsletter

The state gift tax has been repealed, effective in 2009. The gift tax made it difficult for small business owners to transfer assets to their families. North Carolina was one of a handful of states that still imposed such a tax.

I'm uncertain what this means for an average family when it comes to estate planning but I thought it was worth mentioning.

Progressive Democrats of North Carolina

This means the state won't charge tax on gifts...

The feds say you can (currently) give anyone up to $12K a year tax free (federal). Anything more is subject to tax based on the size of the estate when the estate is settled...and special gift tax forms have to be filed with yearly tax returns...as well as another return when the estate is settled.

Medicaid doesn't care about taxes. They care about when the gift was made and whether or not it happened within a time frame that makes it appear it was done to avoid paying for their own SNF care. Look back for asset transfer is currently 3 years...going to five in the not distant future.

Stan Bozarth

Went through this with my dad

when he was struck with Alzheimer's. Medicare and United Health Care didn't pay for squat as far as the nursing homes were concerned, which cost a little over $4,000 per month, and we ain't talking about the Ritz, either. And even though my old man volunteered for the Army in WWII and was direct-commissioned (drafted as a Lt.) for the Korean War, the VA had "no beds available" for him. So it cost him (and my mom) $60,000 for him to be locked up for the last 1 1/2 years of his life.

We learned our lesson, and my mom has long-term care insurance.

Great info on this, Stan....

I went through this with my Mom several years ago. She had this insurance through AARP, but the keyword is 'Skilled Nursing Facility". She didn't have that 'extended insurance'.(I think that's the name) As you say, anytime you have a problem requiring rehabilitation, you will be in one of those 'skilled nursing facilities'. In her last year, she had to go back a couple times, which exceeded her medicare allowance, and then she passed on. In her case, she was a person without property, so they didn't know where to go after her assets. I'm the oldest of her surviving children, and assumed any dispositions. (plus I was out-of-state) I know she was in the process of figuring how she would pay this debt, as she was always conscious of her credit ratings. So I contacted the facility, and had them send me all the copies of statements, showing medicare payments, with dates of service, and it was pretty extensive. I did get lucky, because I sent them a note saying that my brothers and sisters knew she wanted to pay them, and made an offer which was about a quarter of what was owed, but would be covered by the insurance payouts, besides her burial expenses. About this time, the facility had a problem with their manager, who was also in charge of these proceedings. He suddenly quit, and disappeared for some suspicious reason, which I didn't care about. But the facility did, and probably was in disarray. So the next time I called the, I talked with some interim mgr, who was only too happy to settle on my terms. After receiving a letter outlining our agreement on full payment, I forwarded their check. But if the person has property, or assets exceeding a certain amount, a will is usually filed, which is how they are able to attach these debts to the estate.