Hopefully you have planned and saved to have an income you can live on in retirement. You planned to use Medicare and either a traditional supplement or a Medicare replacement plan (advantage) to cover health care costs. Hopefully your other available income can be used for basic living expenses, travel, and some fun.
Would an unexpected bill that comes each month in the amount of $2000 to $8000 a month be a problem for your plan? For many people, it would. While only 70% of us will need Long-Term Care in our homes or a facility (HHS), less than 15% have sufficiently planned for this.
Does that mean all is lost when care is needed? Not necessarily. There are strategies that can help most anyone deal with the costs of Long-Term Care (LTC).
The least expensive way to deal with this is to purchase LTC insurance while you are still healthy, but this topic is addressing gaps, so let’s assume you did not do that. The government has two programs which can help, Medicare and Medicaid.
We all get Medicare at age 65, whether we retired early or are holding off until later. Medicare is health insurance which, while it does not pay for LTC, will pay for a short recovery stay in a nursing home. Medicare has learned that is it less expensive to have you recover from surgery in a nursing home bed than a hospital bed.
Assuming you are in the hospital as an inpatient for 3 days (two midnights), transfer to a skilled nursing home for recovery purposes, and do some type of recovery care rehab 5 days per week, Medicare can pay for that care for up to 100 days AS LONG AS YOU MAKE PROGRESS EVERY DAY. This typically does not go past 10-12 days.
Thus Medicare is not a useful payer of LTC services, but Medicaid is. Medicaid will pay for LTC once you can prove that you are completely impoverished (broke). Getting to broke is not pleasant. A single person spends down all assets to $2000 and cashes in life insurance, a married, at-home spouse can keep a house, car and some money which Medicaid will take back after death. Thus Medicaid will pay for care but you will have nothing left to pass on.
Medicaid also pays providers much less than you or I would pay by writing checks for our care, thus getting in to where you want care can be difficult.
Now, some solutions: There are ways to make your just a part of your money last as long as you do. A part of your net worth can be converted into life income – taking into account your [much] shorter than average life expectancy when you require care. If you can leave 2/3 of your estate intact to pass on, it’s generally a good thing.
You can also leave money for family through Medicaid allowed gifting. Irrevocable burial or burial spaces trusts can be funded for children and their spouses, moving a good chunk of assets to family and will not be counted as a divestment. Medicaid rules allow this in 49 states.
The important thing to remember is that there are solutions for most any situation that can at least help. If you would like to learn what you can do to protect some money for spouse or family, contact www.TheLongTermCareGuy.com to learn your options.