Strategies for Long-Term Health Care

Benjamin Franklin said nothing is certain except death and taxes. The extended epigram almost could have been: Nothing is certain except death, taxes and long-term health care.   

It’s estimated that more than two-thirds of seniors 65 and older will need some type of care long term. 

Long-term care encompasses a range of services needed by individuals who have lost some capacity to care for themselves because of chronic illness or a disabling condition. Research suggests that if savings rates are not increased and government programs to assist the elderly are not strengthened, many retirees will face problems getting what they need. 

According to the Family Caregiver Alliance, by 2030 many retirees will not have enough income and assets to cover any expenses related to a nursing home stay or services from a home health provider. The number of individuals using long-term care services in any setting — home, assisted living or a skilled nursing facility — is expected to reach 27 million people by 2050.

According to the 2015 cost of care survey by Genworth Financial, a leader in the long-term care insurance industry, the average cost of skilled nursing in Alabama is $5, 810 per month. This monthly base rate for Alabama nursing homes is typically lower when compared to neighboring states. 

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But as John Matson, of the Alabama Nursing Home Association, points out, many factors determine the cost of care, which varies not only by location but also the medical needs of those being served. Alabama has 227 certified Medicare and Medicaid nursing homes, with at least one in each county., a senior health care resource that offers a nationwide directory of nursing homes in the United States, states the overall average Medicare 5-Star Quality rating for Alabama skilled nursing homes is 3.3, which ranks 30 nationally. 

It’s no surprise that many people underestimate nursing home costs. Though the cost of Alabama nursing homes is below that of some other states and the national average, the cost of long-term care nationwide is rising. The price tag for a semi-private nursing home room is about $82, 000 annually, an increase of nearly 17 percent over the past five years, according to Genworth. 

So, how do you prepare for a possible long-term care crisis? It’s a complex issue and the best planning strategy differs depending on the individual. Yet experts agree on the importance of planning ahead to avoid unwelcome surprises and putting the right solution in place.  

Most seniors have Medicare-financed coverage as their primary payer of health care costs, but Medicare does not pay for long-term stays in a nursing home. Insurance is another option to cover the costs of long-term care, but not many seniors have this coverage. It’s expensive, and premiums have been increasing in recent years, and fewer insurers are selling these policies. 

Then there’s Medicaid, the United States’ safeguard for citizens whose income and resources are inadequate to pay for health care. Medicaid has multi-layered qualification requirements, which vary from state to state. Medicare typically covers short-term nursing home care, such as when a person needs rehabilitation after an accident. 

Huntsville certified elder law attorney Connie Glass notes that there are many specifics to the Medicaid program in Alabama, which are always dependent on the applicant’s particular set of circumstances.

Glass urges anyone who may be looking at long-term care needs to assemble a team to navigate the process. Along with a certified elder law attorney, she says the team should also include a physician with knowledge of geriatric issues and an accountant or other financial expert with an understanding of the needs of the elderly.   

“It is best to use a certified elder law attorney when planning for long-term care, ” says Glass, who is one of only three certified elder law attorneys in Alabama. The two others are located in Birmingham. The names of all certified elder law attorneys nationwide can be found on the National Elder Law Foundation website. 

When a person enters a nursing home and applies for Medicaid assistance to pay for nursing home care, the Alabama Medicaid Agency looks back into the applicant’s financial history for 60 months to see if that person has given away or transferred anything for less than its value, Glass explains. If the applicant has transferred assets for less than their value, then the agency imposes a penalty, a period of ineligibility based on the value of the asset transferred. 

“Each person is unique, so there is no one right answer for transferring assets, ” says Glass. 

John Craft, clinical professor of law and director of clinical and field placement programs at Faulkner University’s Jones School of Law in Montgomery, says most nursing home residents in Alabama eventually need Medicaid to pay for their stay. 

“Medicaid requires you to ‘spend down’ your assets to a minimum level before you can become eligible, ” explains Craft, who supervises the school’s Elder Law Clinic, which offers pro bono services to low-income seniors. 

To best protect their assets, individuals must heed the five-year “look back” period and plan a full five years in advance of applying for Medicaid long-term care benefits. When you have a plan in advance of the need for care, experts say, there are more options available. 

“If you want to preserve assets for heirs and avoid spending them down on nursing home costs, assets can be transferred without penalty as long as it is done at least five years before needing Medicaid, ” adds Craft. “Asset protection trusts are one good tool to preserve assets.”

Craft says long-term care insurance can provide additional asset protection. Transferring assets may not be an option for some people or may not even be needed, depending on the coverage provided by the long-term care insurance policy, he says. Also, long-term care insurance may pay for services not typically paid for by Medicare or Medicaid, such as home care services and assisted living facilities. 

Craft says giving your home or assets to children might be a good option to avoid having to sell or deplete those assets in order to qualify for Medicaid. However, with few exceptions, gifts to children or others will be penalized by Medicaid if the gifts were made less than five years before qualifying for Medicaid. 

An asset preservation strategy for long-term care should take into account a person’s age, health and prognosis for the next five years, says Craft, who recommends seniors ask themselves just how likely they are to need nursing home care. 

Also take into account income and assets including real estate, as well as family, especially a spouse or disabled children, caregiver support, existing long-term care insurance and the tax implications of any transfers. In addition, revisit any existing estate plan you may have. Who would currently inherit your estate and do you wish to accelerate their inheritance?

Craft advises anyone considering transferring property or assets to children to consult an elder law or estate planning attorney. And ask for the credentials of any attorney you speak to about elder law or asset protection.

Jessica Armstrong and Julie Lowry are freelance contributors to Business Alabama. Armstrong is based in Auburn and Lowry in Montgomery.

Text by Jessica Armstrong

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