Long-Term Care: A Trend for Tomorrow

DE PERE, Wis. - July 17, 2013 - PRLog -- Today, many people worry about long-term care yet do nothing about it.  And, when one spouse enters a nursing home, we all know that the community spouse can protect all of the couples' assets and allow the institutionalized spouse to qualify for Medicaid benefits.  During the planning process the community spouse learns that he or she keeps the family home, one car, all of the household goods and personal property, a prepaid funeral arrangement, and $115,920 of cash or other assets.  Any additional cash assets can be converted into a monthly income stream for his or her benefit by way of a Medicaid Compliant Annuity purchase.  The investment and monthly payments from the Medicaid Compliant Annuity are protected.

Assuming the Medicaid Compliant Annuity investment amount is $300,000, it could pay the community spouse 36 monthly payments of $8,400 (this amount includes the original principal and a small amount of interest).  As a result of the Medicaid Compliant Annuity purchase, the at-home spouse receives a modest monthly income to continue residing in the community and the institutionalized spouse establishes Medicaid eligibility.  The institutionalized spouse will pay his or her monthly income to the nursing home, with the exception of a small amount which he or she retains to buy personal items - haircuts, toothpaste, etc.  The monthly co-pay will continue to the nursing home until the institutionalized spouse's death, at which point, Medicaid ends.

Later, when the community spouse needs nursing home care, the Medicaid program will require him or her to spend-down approximately 50% of his or her net worth before Medicaid benefits will be available (e.g. half-a-loaf planning).  From the earlier example, you know the spend-down amount is likely to be no less than $250,000.  In short, it is a significant expense.

To avoid the high cost, when the community spouse qualified the institutionalized spouse for Medicaid benefits he or she should have purchased a traditional long-term care insurance policy for him or herself.  Not only would the policy have covered all types of long-term care (at-home, assisted living, and nursing home), but the annual cost would have been very affordable in light of the 36-month Medicaid Compliant Annuity.  Finally, when you multiply the annual cost times the number of years that the community spouse would have paid on the policy prior to needing long-term care, the amount would have been insignificant in light of the 50% Medicaid loss noted above.