If you (or a spouse/partner) need long-term care (LTC) when you are older, the cost of that care will likely become a serious issue. Like many seniors, you may end up turning to Medicaid for help paying for LTC. If you failed to anticipate the need to qualify for Medicaid as a senior, however, there is a good chance you will be forced to comply with the Medicaid “spend-down” requirements. The Staten Island Medicaid planning attorneys at O’Reilly Law explain the Medicaid “spend-down” requirements and discuss how Medicaid planning can help you avoid them.
The Cost of Long-Term Care
Although we all hope to avoid the need for long-term care, the reality is that you (and your spouse or partner) stand close to a 70 percent chance of needing some type of long-term care (LTC) services before the end of your life. If either of you do need LTC, you will quickly realize how expensive that care can be. Nationwide, residents paid, on average, over $100,000 per year for LTC in 2021. As you may well imagine, the average cost of LTC for New Yorkers is noticeably higher than the national average at almost $160,000 per year. Taking into consideration the average length of stay is three years, it becomes easy to see how LTC costs could easily exceed half a million dollars. Because neither Medicare nor most health insurance policies will cover LTC expenses, you could be responsible for paying for LTC out of pocket. The good news is that Medicaid does cover LTC expenses; however, you must qualify to get help paying for LTC.
What Is Medicaid “Spend-Down?”
Although Medicaid is predominantly funded by the federal government, the individual states administer their Medicaid programs. As such, there are some eligibility and benefit differences from state to state. All states, however, require applicants to pass income and asset tests. The income limit is tied to the Federal Poverty Level and will change depending on which Medicaid category you apply under, your geographic location, and household size. The low “countable resources” limit is where most seniors have a problem when applying for Medicaid. Although Medicaid does exempt certain assets, such as your primary residence (up to a certain equity limit) and a vehicle, many seniors have accumulated a retirement nest egg full of non-exempt assets that easily exceed the countable resources limit. If your assets exceed the limit, your application will be denied, and you will have to “spend-down” your assets before applying again. In practical terms, this means you will be expected to use those assets to cover your LTC expenses until you have depleted your countable resources to the point where they do not exceed the limit.
How Can I Protect My Assets from Medicaid Spend-Down?
Planning for the possibility that you will need to qualify for Medicaid is important because transferring assets to avoid the spend-down requirement is not an option. Medicaid also uses a 60-month “look-back” rule that prevents such asset transfers. The rule allows Medicaid to review your finances for the 60-month period prior to applying. Any assets transfers made for less than fair market value could result in the imposition of a waiting period before Medicaid will kick-in Once again, you will have to rely on your own assets to pay for LTC during the waiting period.
The good news is that by incorporating Medicaid planning into your overall estate plan early on you can protect your assets from the spend-down requirement. One common Medicaid planning tool that can help protect your assets is an irrevocable Medicaid trust. Assets transferred into such a trust remain out of the reach of the Medicaid “countable resources” eligibility requirements.
Contact Staten Island Medicaid Planning Attorneys
For additional information, please join us for an upcoming FREE online seminar. If you have questions or concerns about how to avoid the Medicaid spend-down requirements, contact the experienced Medicaid planning attorneys at O’Reilly Law by calling 332- 456-0500.