One of the greatest challenges many of my clients face is how to protect their families from the rising cost of long term care – both for themselves when they reach retirement and for elderly parents.
For example, the average cost of staying in a Florida nursing home is between $5,000 to $6,500 per month, or about $60,000 to $78,000 per year. Since the average length of stay in a nursing home is three years, this quickly totals nearly a quarter million dollars. A family with a loved one in a nursing home would need about $3 million in income-producing assets to avoid drawing on the principal.
That’s why it is important to start strategizing now to determine how you plan to pay for long term care.
Three Ways to Pay
Typically, there are three ways to pay for long term care:
- Self Pay – The patient will pay for the expenses out of pocket.
- Long Term Care Insurance – This is essentially a wager between you and an insurance company. You pay premiums and betting that you will eventually need nursing home care. The insurance company is betting you won’t need the coverage and that it can keep all the premiums.
- Medicaid – This government entitlement program assists low-income seniors who need nursing care. However, medical costs have risen so dramatically that even middle class patients can’t afford to pay. About seven out of ten nursing home patients receive Medicaid benefits.
Not Poor, Not Rich Either
If you are more likely to choose Option 3, then you should understand how Medicaid eligibility works. The rules are strict, but they are not impossible to meet.
Income limits are an issue, as well. This varies from state to state, but typically the limit is about $2,000 per month. In addition, Medicaid reviews an applicant’s financial records for the five years previous to their application. The government searches for uncompensated transfers – money or assets given away for free.
What if you earn $2,500 per month or $3,500, or $4,500? These amounts are not enough to pay for care but will disqualify someone from eligibility.
State by state, there are strategies that can help you with the dilemma of having too much income to qualify for Medicaid but not enough to pay for care. Sometimes these are called a Qualified Income Trust or a Miller Trust.
There are a variety of tools available for preplanning to cover the costs of long term care, and I encourage you to act now rather than wait.
I hope this article helps you and your family. As always, should you have a question or concern about a specific case, contact our office.
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