Many people are still a little confused about how Medicare and Medicaid work during a long-term care event.
First, let’s differentiate the two:
Medicare is the government assisted health care plan for the over 65 crowd. It becomes your primary health insurance after age 65. It is designed to take care of short term medical conditions and does not cover long term care events.
Medicaid is the government assisted health care plan for those in poverty. It does cover long term health care costs, but only for qualifying low-income individuals.
If a Medicare covered person requires healthcare, Medicare Part A will cover 100% of the costs for the first 20 days of care. Then from days 21- 100, the patient pays the first $144.50/day with Medicare covering the rest. From day 101 and beyond, the patient pays 100% of their costs. If at any time the physician determines that the patient has moved from acute care to long term care, the claim will end immediately (yes, even prior to the 20 days!).
States have slightly different Medicaid programs. In Minnesota, to qualify for Medicaid (which is called Medical Assistance) the patient must have spent their assets down to only $3000. Assets that are counted are cash, bank accounts, investments, non-homestead real estate, etc. Assets not counted are clothing, one vehicle, personal jewelry, household goods and some specific others. Income over $908/month must be used for the medical costs. The patient may keep a home provided it qualifies under the plan (the most common allowance is for a spouse still residing in it).
Many people try to “give away their assets” to qualify for Medicaid. The government has caught on to this maneuver and it no long works. The Medical Assistance program can “look back” at all gifts made over the last 5 years and include that in the “current assets” number. This means the gifts need to be “paid back” to provide for care costs before you are eligible for Medical Assistance.
A side note – I cannot imagine giving all of my money intentionally to my children for their enjoyment so that I could qualify for Medical Assistance. The MA care programs are not as nice as private pay and the patient will be moved from the more plush private care to the more bare-bones public care. This strategy is, in essence, about intentionally making you poor so that you might live a poverty life-style. I have yet to see the light on why this is a good idea.
Many states have adopted into the Partnership Program. This is a state-by-state program that allows a person to shield assets from the spend-down requirements of Medical Assistance. It works like this:
If I have a partnership qualifying policy, I might have a $250/day benefit with a 3 yr pool of money. This means the total value of my pool is $273,750 (365 days X $250/day X 3 years). If I add the $3000 asset cap to this number, Instead of qualify for MA by spending down my net worth to $3000, I qualify be spending it down to $276,750 ($3000 + $273,750) thereby preserving much more asset for my healthy spouse and not leaving him or her destitute in their twilight years. Your policy MUST be listed as a participating policy in the Partnership Program for this to work.
In summary, you need to have a plan beyond government help if you’re not okay dying penniless and you might feel guilty letting a spouse spend their remaining years on the street. Understanding what plan the government has in place for you will likely make you want to avoid it. Make sure that if you look at insuring this risk, it qualifies for the Partnership Program. Consult with a trusted Financial Advisor for help in finding a plan that is right for you.
Other Enhanced Insurance articles related to Long-Term Care Insurance:
Long-Term Care Insurance (With Video)
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