WHAT IS LONG TERM CARE?
The U.S. Administration on Aging predicts that 1/3rd of today’s 65-year-olds may never need long-term care. But 2/3rds of us will. 40% of us will become nursing home residents. Even more of us will live in a nursing home for weeks or months of rehab following a hospital stay. 1 out of 5 of us who reside in a nursing home will live there for more than 5 years. Longer-lived people are more likely to need long-term care: 70% of people age 65 will become disabled; half of people age 85 or older suffer from some form of dementia.
The Garrett Law Firm can help you arrange for long-term care at home, delaying and possibly preventing a move to an assisted living or skilled nursing facility. We can help you determine how to pay for assisted living or nursing home care while protecting your spouse and leaving a financial legacy for your children.
Contact an Austin elder and estate planning lawyer you can trust.
It is easy to confuse Medicare and Medicaid.
It is also easy to forget that, unless we have a need for skilled nursing or therapy or have experienced significant cognitive decline, neither Medicare nor Medicaid will pay for assistance with the Activities of Daily Living. It is these we will have trouble with soonest and longest — even if we never need more.
VA benefits or long-term care insurance might help. VA Aid & Attendance and most long-term care insurance policies will pay for assistance with activities of daily living at home, in an assisted living facility or a nursing home if we require “substantial assistance” with at least two activities of daily living for more than 90 days.
Whatever help we need, we will have more choices, the more of it we can pay for. When investing for retirement, the cost of investing can make a big difference.
ACTIVITIES OF DAILY LIVING (ADLs)
The basic “activities of daily living” or “ADLs” are
- dressing and grooming
- maintaining continence
- using the toilet
- moving from one place to another
- getting sufficient nutrition and hydration
INSTRUMENTAL ACTIVITIES OF DAILY LIVING (IADLs)
More complex tasks are sometimes called “instrumental activities of daily living” or “IADLs.” These include managing finances, grocery shopping, preparing meals, transportation and managing medication. Very little of this is provided by home health care agencies. Medicaid considers these to be tasks which children should perform for their parents without compensation. Bill paying services, Instacart, Meals on Wheels, Drive a Senior, Uber and Lyft and medication reminder programs can help.
Often people enter an assisted living facility when they need more help with Activities of Daily Living than can be provided at home by family or scheduled caregivers. They move to a nursing home when their medical needs become greater still. According to Genworth Financial, in 2020 a single room in an assisted living facility in the Austin area averaged $51,000/year, comparable to $64,058/year for a shared room in a nursing home. (In 2005 it was $35,160.) Where available, a private room in a nursing home averaged $88,330/year, It is easy to understand why 96% of Texans run out of money within six months of entering a nursing home and must apply for Medicaid. Those who run out of money while at home or in an assisted living facility and do not have help from family or long-term care insurance have even more difficulty.
Too many people assume that “this will never happen to me.” But it will. Whether we plan for it or stick our head in the sand, it will.
If family members help, they should have support. www.lotsahelpinghands.com lets people ask for and sign up to help. Getting groceries, driving mom to the doctor, researching an emerging condition and giving the main caregiver a weekend break can be a big help. See Resources for Family Caregivers.
Family caregivers should also be paid, whether contemporaneously or by naming them on a deed or IRA or pay-on-death or transfer-on-death account which passes assets free of Medicaid Estate Recovery. A caregiver who quits paid employment to care for a family member loses, on average, $324,000 over a lifetime, not to mention countable quarters for Medicare and Social Security benefits. Caregiving can be isolating, involve unpredictable and increasing demands, and hurt the caregiver’s own health and well-being. A Family Caregiving Agreement, signed off on by all the family members, even those who will only provide care occasionally, at a distance or in a pinch, acknowledges that caregiving is valuable work.
Whether for respite or because caregiving has become too much for the family to provide or pay for, the majority of us will spend time in a senior facility.
Instead of having your distraught family choose from the two or three facilities found by a discharge worker at the hospital, look over places in advance — at least online. Nursing Home 411, Medicare Nursing Home Compare and ProPublica’s Nursing Home Inspect are good places to start. Assisted living facilities are not subject to the same scale of regulation but are licensed by the state and categorized by the level of mobility and independence required of residents. Independent living facilities are completely unregulated. Read the contract carefully, at least twice, before handing over a check. An independent living facility could be more restrictive as well as more expensive than truly living independently in your own apartment.
Medicare is health insurance used by 16 million Americans 65 and older and by disabled workers receiving Social Security Disability Income (SSI). It is not long-term care insurance. It pays for much less than most people think. It is estimated that over their lifetimes a couple aged 65 will pay, on average, $275,000 in Medicare premiums, co-pays and deductibles. Half will pay more. There is no co-pay for the first 20 days of hospitalization within a 60-day period. For days 21-100 of hospitalization, the co-pay gradually increases from 0 to 100%.
There are two types of Medicare. Traditional or “original” Medicare with the right Medicare Supplemental Insurance (sometimes called “Medigap”) has higher monthly premiums but, after age 70, costs the average person less. It is also accepted by more physicians, nursing homes and hospitals. For example, M.D. Anderson only accepts traditional Medicare. Medicare Advantage policies have lower premiums but a 20% co-pay. This may work for very healthy people in the first few years of retirement but if they do not maintain excellent health, they will not be able to switch to traditional Medicare with Medicare Supplemental Insurance later. This will increase their lifetime costs.
Medicare, whether traditional or Medicare Advantage, is divided into Medicare Part A (hospital Medicare), Medicare Part B (out-patient Medicare) and Medicare Part D (prescription drugs). The “C” exists because Medicare Advantage was formerly called “Medicare Choice”.
Medicare Supplemental Insurance comes in a variety of programs, labeled A through N. Some cover the co-pay. Some provide emergency care while outside the United States.
Whether you choose traditional Medicare or Medicare Advantage, you should apply in the 3-6 months before your 65th birthday. There is a penalty for applying late. However, if you continue to work and receive health insurance from your employer, the penalty is waived.
Medicare pays for “medically necessary” nursing home care or home nursing care and therapy. But it only does so following in-patient (not observation status) hospitalization for at least three midnights. If nursing or therapy is required, Medicare also pays for assistance with ADLs. Your physician must reauthorize this care every 90 days. Many people living at home or in an assisted living facility receive these services through Medicare.
For detailed information on when to sign up for Medicare, Medicare plans and what they offer, visit your local Area Agency on Aging and other sites listed on Resources for Older Americans
Talk with an elder law and estate planning attorney as well as to a Certified Financial Planner to make sure that you are pointed in the direction you want to go.
Medicaid is a needs-based benefit for which none of us have paid other than through the general tax revenues. It is for people who qualify financially as well as medically. Nursing home care has become so expensive that 78% of Texans entering a nursing home qualify for Medicaid. An AARP study found that 96% of Texans exhaust their personal resources within 6 months of entering a nursing home and need Medicaid then.
Some people have limited income and few countable assets so can quickly qualify. Others need to make arrangements to qualify or to protect their spouse and any other dependents or to leave a legacy.
The monthly income limit is $2,282 (2021). Income in excess of this can flow through a Qualified Income Trust (sometimes called a Miller trust) and some be diverted to the spouse to bring the spouse’s income up to $3,259.50 (2021).
The asset limit is $2,000 but not all assets are countable. In Texas, whether you are married or single, up to $603,000 (2020) in equity in your home is exempt as long as you have an intent to return. Personal effects and household goods, one car, an irrevocable funeral policy and certain other assets are also not counted.
Your spouse’s income is not counted. Your spouse is also allowed to keep up to $130,380 in assets (2021) and, since Texas is a community property state, may keep more with a Marital Property Agreement, a Qualified Domestic Relations Order, a Medicaid-compliant annuity or other arrangement. The best approach to preserving assets for your spouse varies with the nature and amount of assets and from person to person.
To truly protect your spouse and any dependents, you may want to plan far in advance, consulting a qualified elder law attorney. But even if you have not planned, have not considered Medicaid until the day you find yourself in a nursing home, there is almost always something that can be done.
The one thing not to do is to gift away your assets. The value of assets transferred for less than fair market value within the 60 months before the month in which you apply for Medicaid is counted in determining eligibility unless you can prove that you did not transfer assets in order to qualify. You could be required to sell assets you no longer own. You could be financially disqualified for months, even years, because you transferred property within that 60-month period.
You could need nursing home care but have no way to pay for it. You and the person to whom you transferred the assets could be prosecuted for Medicaid fraud. Don’t risk it.
Even if there were no criminal prosecution, the facility could bill you at its private pay rate, substantially higher than what it would receive from Medicaid. If your family could not pay, you could wind up spending the penalty period in a board and care home with neither nursing care nor therapy, just three modest meals a day. You might later qualify but see a home or ranch or business you planned to leave to your children subject to Medicaid estate recovery.
Many people want to leave a financial legacy. Using an extended life estate or “Lady Bird” deed or a transfer on death deed, you can save your home for your family. Using a DMV form could save your vehicle. Forming a limited liability company or other legal entity could keep your ranch or business operating even when you are not there to run it. An elder law and estate planning attorney can show you ways to do this.
Don’t just “spend down,” giving the nursing home money you or your family may need. Consider what will enhance your life. Consider applying to receive care at home using Star + Plus, a Texas Medicaid waiver program: you may not need to “spend down” at all. Texas Medicaid Eligibility: Assets and Income
There are three levels of benefits: basic, housebound and aid & attendance, sometimes called “improved pension benefits”. Eligibility is determined somewhat differently than eligibility for Medicaid. Because of the high cost of long-term care, many veterans and their surviving spouses may be eligible for benefits even if they have significant income and assets. Be careful not to do something which would help you qualify for VA benefits but would later make you ineligible for Medicaid. If you are disabled or are 65 or older, you may be eligible for both. People commonly use VA Aid and Attendance for home health or assisted living first and then apply for nursing home Medicaid.
You may want to ask, Am I Eligible for VA Pension Benefits? If you served 90 days (other than boot camp), one day of which was during a time of war, you may well be. Income and asset limitations are calculated a bit differently than for Medicaid and there is a 36, rather than a 60, month “look back” period to determine whether you transferred assets in an attempt to qualify. Your home and up to two acres is exempt. Vehicles used by family members are exempt. For VA purposes, “net worth” consists of countable assets and annual income after subtracting unreimbursed medical expenses to the extent that they exceed 5% of the Maximum Annual Pension Amount of $1,881 (2021). Countable assets, whether or not you are married, cannot exceed $130,773 (2021).
A list of accredited representatives, agents and attorneys who can help you apply can be found at www.va.gov/ogc/apps/accreditation/index.asp. You may prefer to work with an elder lawyer to make sure that whatever you do, you will continue to qualify for nursing home Medicaid or Medicaid home health care.
From 2005 to 2015, average long-term care insurance premiums rose 44.5% while nursing home costs more than doubled (American Association for Long-Term Care Insurance.) Premiums are deductible as medical expenses, subject to age-based limitations ranging from $420 for people under 40 to $5,200 for people above 70 (2018).
There are many types of long-term care insurance policies. Some are only for nursing home care. Some are only for home health care. Some are for care at home, in an assisted living facility or in a nursing home. They are for a number of days or months or years or for “a pot of money.” The days or weeks, months or years are counted based on the policy provisions on visits and hours, not necessarily based on the calendar.
Recently policies which combine long-term care insurance with life insurance or an annuity have become available. These typically cost more than those policies would if purchased individually but have less restrictive underwriting requirements.
It is also possible to convert an annuity or a life insurance policy to a long-term care policy. Life insurance benefits can be accelerated. A small long-term care policy can be converted to a special long-term care account.
The Texas Long-Term Care Partnership is a partnership between the State of Texas and insurance companies which offer certain policies through it. Once the policy benefits have been exhausted, the policyholder can qualify for Medicaid and keep assets equal to the policy benefits received. A Texas Partnership policy seems to be most attractive to someone who hopes to preserve $100,000 to $400,000 for the other spouse. It could also help a single person who wants to supplement Medicaid’s measly $60/month personal needs allowance.
There is also “short-term long-term care insurance,” which has no waiting period and pays for up to one year. This may be all you need. Or it may give you time to sell some assets in order to pay for care later on.
Policy jargon is arcane. The industry continues to experience turmoil with more and more companies exiting the market. Before talking to a salesman read the Texas Department of Insurance’s “A Shopper’s Guide to Long-Term Care Insurance.” www.tdi.texas.gov/pubs/consumer/cb032.html. An insurance policy is only as good as the company which issues it will be when it is time to change. In addition to A.M. Best and Standard & Poor’s, check out the Weiss ratings of both financial strength and ability to pay. The $25 charge could be well worth it…Ask an experienced person with no financial interest at stake to review the policy with you during the 30 day review period. Your interpretation and that of the salesman may well differ,
People are generally advised to spend no more than 7% of their income on long-term care insurance, a challenge for those living on a fixed income if premiums rise faster than investment values. The Texas Partnership recommends that people purchase long-term care insurance only if they can afford annual premium increases averaging 20%. No year is “average.” Between 2012 and 2013 premiums on policies offered through the Texas Partnership rose between 11% and 43%.
Most long-term care insurance policies are reimbursement policies. You must pay up front, submit records and seek reimbursement from the insurance company. Some must pre-approve a facility and plan of care, a written plan of care, based on your doctor’s plan of care and specifying what the insurance company will pay for in services, hours and amounts, how these will be calculated and when the insurance company will pay, should be signed by your long-term care insurer before you sign a home health care or facility resident’s agreement.
You may also want to review the proposed resident’s agreement with an elder law and estate planning attorney. Resident’s agreements are negotiable. They are prepared by and to benefit the facility and typically contain provisions which you will want deleted. Assisted Living Facility and Nursing Home Residents’ Rights
QUALITY OF LIFE
We want to choose where we receive care and who will provide it. We want to enjoy a good quality of life and good care. We want to move from one setting to another without compromising this.
This affects where and how we live and when and how we arrange our insurance and investments. It may mean that, like 45% of Americans in 2010, we choose hospice care, which by focusing on how we want to live can actually extend as well as improve our lives.
It also affects how we create documents to help us Stay in Charge
Let an elder and estate planning lawyer experienced in asset, spousal and family business protection, long-term care and Medicaid planning help you stay in charge. The Garrett Law Firm works with individuals and families throughout Central Texas to create practical, low-cost solutions. 800-295-3449