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LTC Bullet:

Why Not Medicaid?

Thursday July 1, 1999

Seattle-

Three cheers for Kiplinger's Retirement Report. We rarely see frank advice to seniors from the financial planning press about the dangers of forgoing LTC insurance and relying on Medicaid. But "Why Medicaid Should Be a Last Resort" in the newsletter's June 1999 issue is exactly that. The following quotes give a good sense of the article's content. Watch out for one bizarre twist, however. After warning about Medicaid's deficiencies of access, quality, discrimination and institutional bias, the article cites a notorious Medicaid planner and former president of the National Academy of Elder Law Attorneys who recommends artificial self-impoverishment to qualify for Medicaid! Go figure. Another shortcoming of the article is that it is very naive about the severity of Medicaid income and asset eligibility rules, which are much easier to evade than the article indicates. But, all in all, an excellent piece…

"Why Medicaid Should Be a Last Resort"

"In our recent four-part series on long-term care insurance, we promised to discuss what options individuals have if they can't buy insurance to help them pay for long-term care…

"Couples or individuals who find themselves in this situation may have no option but to spend their assets for care and ultimately to turn to the government-funded Medicaid program, which pays nursing-home costs for people who meet certain assets and income standards.

"Once you start depending on the government to pay these long-term-care costs, however, you lose the freedom to decide how and where you will receive care. Assisted-living facilities, for example, seldom accept Medicaid patients. Most nursing homes do, but you may have to wait months or even years for a bed. If you live in a high-cost area, you may find the only Medicaid openings are in less-expensive parts of the state, far from the family and friends you count on to be your advocates and care monitors.

"On top of this, the Medicaid program is complicated-it's not unusual to hear of cases where lawyers have made estate-planning mistakes that result in their elderly clients being banned from the program…

"Federal Medicaid Basics

"Figuring out what the standards are, and what individuals must do to meet them, is a daunting task for laymen and experts alike...

"The income of a Medicaid nursing-home patient-typically Social Security and pension income-must generally be used to pay the costs of care…

"Generally, a Medicaid applicant must 'spend down' assets, such as cash, stocks or bonds, until only $2,000 remains…

"In most cases, if an applicant transfers assets, he or she must do so at least three years before applying for Medicaid. This is called the 'lookback period.'…

"If you put the money in a trust, however, the lookback period could be five years…

"Estate recovery. Federal law requires every state to recover what it spent for the care of deceased nursing-home patients on Medicaid…

"Experts warn parents not to be too hasty in giving assets to their children or to others prior to entertaining a nursing home. If you give money to your children, warns [an] elder-law attorney…, 'they are under no obligation to give it back or to help you out if you need it later.'…

"If your state's Medicaid rules permit it, lawyer [name omitted to discourage Medicaid planning abuse] recommends buying income-producing rental properties as a way of shifting assets to the exempt category. Another option is to buy an annuity, which can provide income to a patient whose current income is below the Medicaid limit."

*Source: Kiplinger's Retirement Report, Vol. 6, No. 6, June, 1999, pps. 11-12. For reprints, contact Albertha Brown at 202-887-6429 or abrown@kiplinger.com To subscribe, call 800-544-0155 or e-mail sub.services@kiplinger.com
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