When a Family Member Needs Long-Term Care – The Medicare Dilemma

Married couples nearing retirement age are often not prepared for a health crisis necessitating a nursing home placement. Yet, a person at age 65 has a 70 percent chance of requiring long-term care. Whether your spouse has a stroke, dementia, or progressive neurological disorder, ensuring your spouse’s continued safety at home can become impossible over time.

According to the Centers for Medicare and Medicaid Services (CMS), Original Medicare does not cover long-term care if it is considered custodial rather than rehabilitative. Therefore, the nursing home placement of a husband or wife can quickly create financially-related stress for the healthy spouse remaining at home.

The following are some options for protecting your life savings in the event that you, your spouse, or your elderly parent needs long-term care.

Long-Term Care Insurance and Life Insurance

Policies for long-term care insurance vary in terms of price and coverage. The following are five factors for you to consider before purchasing a long-term care policy (per AARP):

  • Your age (since policies typically are less expensive when purchased at a younger age);

  • Your annual income (as you will need to be able to cover the cost of long-term care insurance premiums);

  • Your support system (as the availability of family members and friends to assist with personal care can help to determine your need for this type of insurance);

  • You financial investments (such as IRAs and stocks);

  • Your taxes

Life insurance policies differ as to when the beneficiary receives a pay-out. While traditional life insurance policies provide a payment only after the death of the policy-holder, some types of life insurance enable “cashing out” the policy after a specified period of time. It is a good idea to compare your costs for any policy that enables “cashing out” in 10 or 20 years to its potential future benefits.

Medicaid and the Five-Year “Look-Back” Regulation

Your state’s regulations need to be met (as well as federal regulations) before your spouse in a nursing home can qualify for Medicaid coverage. Meanwhile, Medicaid coverage for a nursing home resident only begins once that person is considered to have extremely limited financial assets and overall net worth. One method that people attempted in the past to hide their financial assets from Medicaid was to transfer their life savings to an adult offspring’s personal bank account (or slowly give their adult children gifts of money).

This method of protecting financial assets no longer works as a strategy. Medicaid instituted a regulation that enabled a five-year look-back at financial assets to determine actual Medicaid eligibility. If the healthy spouse transferred jointly-owned savings into the bank account of an adult offspring within the previous five years, this was still considered a financial asset of the spouse entering the nursing home for determining Medicaid eligibility. This circumstance makes advance-planning for the possibility of nursing home care crucial for most married couples.

Adult Day-Health Centers – Who Pays?

If you are still employed (or disabled) and your spouse has Alzheimer’s disease, a day-health center may provide a safer environment for your spouse than remaining in the home all day. The advantage of day-health centers for people with Alzheimer’s disease is that these centers also provide a stimulating environment and varied social interactions that can reduce the progression of Alzheimer’s disease. According to the Centers for Disease Control, day-health centers across the US provide services to 286,300 people each day.

While Original Medicare does not cover the costs of adult day-health centers unless medical care is also provided, some Medicare Advantage plans – beginning in 2019 – were allowed to offer coverage for an adult day-health center’s services as a supplemental benefit.

The professionals at Life First Financial & Insurance are available to assist you in navigating various insurance options that can aid you in preventing financial disaster due to the future long-term care needs of your spouse.

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