What is long-term care?

Long-term care is a variety of services designed to help meet both the medical and non-medical needs of people with chronic illnesses, disabilities or advanced age. It may involve assisting with daily tasks like dressing, bathing and bathroom care, meal preparation, and round-the-clock medical care, which may require skilled practitioners. Long-term care may be provided at home, in a community, in assisted living or in a nursing home. 

The care may be provided by a patient’s family member, but this is often impractical, for the assistance may require specific training. Many families rely part-time or full-time on professional long-term care, which can be very expensive.

In New York, the average cost tends to be higher than the rest of the nation, with annual nursing home care ranging from $135,000 to over $200,000, and in-home care in the $22 to $30 per hour range.

Because of the cost of this care, the majority of older Americans cannot afford it without help from public programs like Medicaid, unless they purchased private long-term care insurance during their 50’s and 60’s.

What is Medicaid?

Medicaid is a federal healthcare program, administered through each state government. It provides payments for medical services for citizens with limited resources. It is different from Medicare, which is a government healthcare program available for any citizen over the age of 65.

Medicaid is currently the only option to pay for long-term care without private insurance or out of pocket expenditure.

Healthcare insurance normally doesn’t cover long-term care, and Medicare only pays the cost of care for up to 100 days, with patient co-payment.

A vast majority of elderly citizens requiring home care and nursing home care rely on Medicaid in order to receive the care they need.

Seniors may exhaust their entire life savings for long-term care.

Do you know someone who has spent time in a nursing home? Most people believe it will never happen to them. However, a 2017 AARP study estimated that 47% of men and 58% of women will need some type of long-term care in their later years. Preparing for long-term care should be a part of everyone’s retirement plan.

The New York Times published a story in 2012 about a retired schoolteacher who was forced to deplete her life savings of $300,000 on nursing home care before she could qualify for Medicaid. She was also required to contribute all but $50 of her monthly Social Security income toward nursing home costs. Her situation is not a one-off, even today.

Medicaid applicants for long-term care must meet strict financial eligibility requirements.

Medicaid is designed as a payor of last resort, meaning it will only kick-in when a patient has no other option to pay for their needed medical treatments.

Nursing Home Medicaid

Applicants for Medicaid for nursing home care in New York are allowed only $30,182 (as of 2023) in total assets, plus a burial fund and certain exempt assets, such as a car, IRA and clothing. Any income beyond $50 per month must be contributed toward the cost of care before Medicaid will pay.

If the applicant owns a home that is not occupied by a spouse or an underage or disabled child, the value of the house is counted toward the applicant’s total assets. This means the equity of the house may be required for payment for long-term care.

If the applicant is married, while the other spouse remains in the community and independent of long-term care, the community spouse may keep $148,620 (as of 2023) in assets, in addition to the home. The community spouse is also allowed a monthly income of up to $3,715.50 (as of 2023) before being required to contribute to the cost of the applicant’s nursing home care.

Community Medicaid (Home Care)

If the Medicaid applicant seeks to cover the cost of in-home long-term care services, she or he may keep the same $30,182 (as of 2023) in total assets, plus exempt assets, including the home in which the applicant resides. 

But this does not mean the home is totally protected for their family. Medicaid recovers the cost of the paid benefits from the estate of a Medicaid recipient once he or she passes away.

The home care applicant is also allowed to keep a monthly income of up to $1,697 (as of 2023) for an individual, or up to $2,288 (as of 2023) for a couple. While the income over $1,697 should be technically available to cover long-term care costs, a “Pooled Trust” can be utilized to keep the excess income to pay for living expenses beyond the home care.

There are other planning options available to help preserve assets and income while still qualifying for Medicaid benefits, but one must plan ahead.

Medicaid will penalize the transfer of assets.

If a Medicaid applicant attempts to give their assets away so that they may qualify for benefits, then they will be ineligible for Medicaid benefits for a number of months, known as the Penalty Period. 

The transfer of assets rules do not currently apply for home care benefits, so that one can qualify for New York Medicaid immediately after transferring assets. This rule is changing for all home care Medicaid recipients applying after the implementation of the new rules . We will discuss this further below.

When applying for nursing home Medicaid, the Department of Social Services will require financial records for the past 60 months (called the Lookback Period) and they will examine all transactions.

The penalty period for transfers is calculated by dividing the total value of all assets transferred from the applicant by the average monthly cost of care in their area. So, if a widow transferred her $250,000 home to her child during the 60-month period, and the average cost of nursing home care is $10,000 per month in her area, then her penalty period is 250,000/10,000, which works out to 25. She will not be eligible for Medicaid coverage for 25 months, and she will be personally liable to pay for her care in the interim.

The sooner a person transfers their assets to their family members or to a trust, the better their chance to avoid a penalty period.