Many seniors have misconceptions on the differences between Medicare and Medicaid eligibility benefits.

Throw in long term care insurance, and the water gets even more muddier. Even as a Certified Financial Planner, it’s tough trying to stay on top of all the issues concerning seniors.

To help clear some of the mental fog that comes along with these issues, I decided to bring in a subject matter expert to help out.  Tiffanny Sievers, Attorney at Law and founder of SI Elder Law has been kind of enough to share her expertise on the differences between Medicare and Medicaid and how seniors can plan for their later years. Here’s what she had to say….

1. What steps can one make to prepare for dealing with elder issues?

In order to properly prepare for elder issues a individual first needs to have a good foundation of good planning documents. This means having a Power of Attorney for Property and a Power of Attorney for Health Care. These documents allow someone you pick to make property and health care decisions for you when you are unable to do so yourself. Second they need to be prepared for an untimely death. It is better to plan when you are healthy than when you are sick.

Of course, meet with an attorney and that attorney can help you decide what documents you will need to make sure that your wishes are carried out after your death, such as a last will and testament or trust. Third, meet with your financial advisor to determine what investments will give your beneficiaries the best tax benefits and make sure that you have enough Life Insurance to pay for your burial expenses.

Finally, you need to make sure that you have enough assets to avoid running out of money. Once you run out of money, you run out of options. One needs to meet with an elder law attorney, like myself, to make sure that your assets are properly placed to avoid running out of money if you need long term care either at home or in a nursing home.

2. How long will Medicare cover nursing home costs?

In a nursing home, Medicare will cover the first 20 days 100% and then the next 80 days at 80% if you continue to improve medically. After the first 100 days no matter how much improvement you make, Medicare will stop paying and you must either move out or find some other way to pay.

3. What is the difference between Medicare and Medicaid? Common misconceptions?

Medicaid

Almost everyone over the age of 65 is on Medicare and it doesn’t matter what your assets are. However, you must qualify for Medicaid, Medically and financially. Medicaid will only pay if you have limited assets. This means that after Medicare stops paying you have to spend down your assets until you are just about broke before you qualify for Medicaid.

4. How much does it cost to be in nursing home?

Nursing homes in Southern Illinois cost between $2200 and $5500 a month. In Chicago, one month is $7,500 and up. Assisted Living Ranges from $1,500 to $4,500 a month. Private caregivers in your home range between $3000 and $12,000 a month depending on how much care is needed.

5. What are the ways to pay for nursing home costs?

In my opinion, there are five ways to pay for nursing home costs:

1. Private Pay – with good old fashion cash.
2. Long Term Care Insurance – If you have bought “nursing home insurance” the policy will pay a certain amount of money per day for your stay in a nursing facility. You must have bought a policy before you needed nursing home care.
3. Veterans Benefits – The Veterans Administration offers a VA Pension benefits for Veterans or Widows of Veterans if you meet three criteria:

• 1. Served at least 90 days of active duty
• 2. One of those days was during a period of war
• 3. Were something other than dishonorably discharged from the military.

4. Medicare – as discussed above will only pay for part of the first 100 day stay in a Skilled Care Facility
5. Medicaid – Medicaid pays for your entire stay at a nursing home or supportive living facility. It does not pay for care at home.

Medicaid, unlike Veterans benefits, does not pay a cash benefit but only pays directly for services. In fact, you will never receive any cash from Medicaid. Medicaid has no limit, it will pay for any kind of care that you need. For example, Medicaid will pay for the removal of a splinter or for open heart surgery, no matter the cost.

In order to qualify for Medicaid there are asset and income limitations. If you are married, the community spouse cannot have more than $109, 560 plus a house in assets. If you are married, the community spouse will get to keep about $2700 a month of the couple’s combined income. Whatever income the couple has over the $2700 the nursing home will be awarded.

If you are single, you must have less than $2000 in assets and all of your income will go to the nursing home less $30 a month.  What SI Elder Law does, is help protect assets so that you can be on Medicaid and not be completely broke.  In most cases, SI Elder Law can save half of your assets once you are in a nursing home and you will receive Medicaid benefits.  The sooner that you call SI Elder Law the more money that we can save.

6. What hope, if any, is there for those that didn’t plan?

With the current laws right now in Illinois, if you haven’t done any planning and are already in a nursing home, I can save half of your assets. The sooner you get to me the more money that I can protect. For some of my clients, I am able to protect everything.

7. Anything else?

Remember, that any transfer of assets, if not done the correct way can give you a big penalty period and that might have been avoidable. It is best to talk with an Elder Law attorney before moving any assets so that you get the shortest penalty period possible or avoid a penalty period at all.

If anyone is already facing the possibility of nursing home care, I offer a free consultation in my office to see if there is anything that I can do to help.

photo credit: Patrick – msigarmy.com

Personal Story on Long Term Care Insurance

Previously, I had written a piece on Long Term Care Insurance.  As I stated then, I’ve been fortunate enough to not had any family members that have had an extended stay in a nursing home.  According to the percentages, my family is very blessed.  One of my clients hasn’t been so lucky.  His father has been in assisted living for many years now.  Knowing that this father had taken out a long term care insurance policy, I asked him to share the details on what that policy has done for their father.  Here is his story:

One of His Best Purchases

In his late 60′s, my father, a widower, purchased a modest LTC Insurance package with 2 years of benefits @ $75 a day.  At that time, dad was in perfect health with low cholesterol and low blood pressure.  He was a non-smoker, not obese and physically active.  His family medical history was great.

It’s amazing that the father had the foresight to do this.  Most people don’t purchase long term care insurance because they are in good health.  Often times referred to the “Superman syndrome”, we never think we are going to get sick.

It’s Too Expensive

Later, at the age of 81, dad wanted to cancel the policy because he thought the premiums were too high, and the expense was too much.  My sister and I pointed out to him that his family lives a long time and even though he was still in very good health, that in his later years he may need these benefits.  He reluctantly agreed to keep the policy.  Three years later, dementia required Dad to enter an Assisted Living Program for 6 months followed by a Nursing facility when assisted living failed to provide the level of care that he then needed.  This policy has provided most, but not all of his care, in these two facilities and helped our family, with the assistance of an elder law attorney, to financially protect much of his estate if he continues to live several more years.  Our only regret is that we did not encourage our father to get a policy with a larger per diem benefit, and a term longer than 2 years.

In the state of Illinois, Assisted Living average cost is $35,472 per year.  In larger metropolitan areas, that cost can soar to more than $54,000.  Long term care insurance should be considered for any portfolio.  In my clients case, they are very fortunate to have had it. That insurance is still currently making those payments and not draining the father’s investment portfolio.  Having the policy has at least eased the financial burden of having to continually pay the long term care costs.

photo by _SiD_

My family has been fortunate to not have had a family member spend a considerable time in the nursing home. For families that have not been as fortunate, the whole experience can be a devastating one; emotionally and financially. For those that were fortunate enough to have taken out a long term care policy are not burdened with the mounting costs for nursing home care. But long term care policies can be complex and many choose to postpone them. In this post, I want to talk about the cost of long term care in general and then have a series of posts that address other long term care issues.

Why even consider long-term care insurance?

Research has recently indicated that 69 percent of those turning 65 in 2006 can expect to use long-term care. The average stay is about 2 ½ years, or about 30 months. You think that sounds bad, it gets worse. In a study done by Genworth Financial, nursing home care in IL has gone up by 26 percent over the past 5 years. This compares to 17 percent increase nationally.

Cost of Long Term Care

The numbers get even more staggering. The study also found that one year in a private nursing home in Chicago costs $72,567 and $52,362 throughout the rest of the state. Considering that the average annual household income is only around $48,000, the nursing home costs is about 1 ½ times that. Those figures aren’t expected to slow down any time soon, with nursing home costs rising faster than the rate of inflation.

2008 Cost of Care Survery:

Assisted Living: A private one-bedroom unit in an assisted living facility in the U.S. has an average annual cost of $36,090. In Chicago, the average cost is $54,089 per year. In other parts of the state, the average cost is $35,472 per year.

Home Care: Nationally, the average hourly rate for a non-Medicare certified, state licensed home health aide is $19.18, a cost that translates to $43,884 per year for 44 hours per week of care. In Chicago, the average hourly rate is $20.42, or $46,721 per year for 44 hours per week of care. Elsewhere in Illinois, the average hourly rate is $18.65, or $42,671 per year for 44 hours per week of care.

Adult Day Health Care: First year research findings indicate the average annual cost for five days a week in an adult day health care facility is $15,236 nationally. The comparable cost in Chicago is $13,156, and $15,959 throughout the rest of the state.

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