Planning for your senior years is a complicated and emotionally tough task. It is often made all the tougher by the myriad misconceptions that exist about your options. There is a lot of misinformation about all aspects of senior planning, from nursing home decisions to appropriate legal documents and structure.
In this second article in a four part series, we will discuss the next 7 common costly misconceptions about planning for your senior years. We hope this discussion will help set you on the right track and make your planning decisions easier. You can find the first article in this series here.
Misconception #7: You will never end up in a nursing home. That’s hard to predict. Your odds are roughly 50/50. Of Americans reaching age 65 in any year, 48% will spend some time in a nursing home. One in four seniors will require care for longer than one year. That means one in four seniors will face costs of $100,000 or more, which does not include the cost of prescription drugs. Even worse, one in ten will require nursing home care for more than five years, costing a staggering $600,000 or more.
Misconception #8: Medicare will pay for all of your long-term nursing home costs. Not true. Medicare may pay for up to a maximum of 100 days of skilled care in a nursing facility, providing you meet certain requirements. One, you must have moved into the skilled nursing facility within 30 days after your discharge from a hospital for a related illness or injury. Two, your hospital stay must have lasted at least three days. And three, you must require and receive an ongoing skilled level of care. Medicare will pay the entire cost of your care for days 1-20, but for days 21-100 Medicare will provide only partial coverage. Medigap insurance often makes up the difference for the partial Medicare coverage during days 21-100. If you are fortunate to receive 100 days of Medicare coverage and cannot return home, you have three primary ways to pay ongoing costs: long-term care insurance, Medicaid, or from your personal funds.
Misconception #9: Medicaid won’t pay your nursing home costs. It’s only for poor people. Not true. In fact, a substantial number of all nursing home residents qualify for Medicaid to pay their expense.
Misconception #10: To qualify for Medicaid, you will have to give up your family home. No, not to obtain initial eligibility. At the time you qualify for Medicaid, you may keep your home as long as you intend to return there to live, no matter whether you eventually can or do. There are Medicaid laws that allow you to keep your home if you are married or meet other legal requirements. These laws are very fact specific. However, if your home is part of your estate at death, the Commonwealth of Pennsylvania may have the right to recover whatever it has spent on your care.
Misconception #11: If your spouse enters a nursing home, all of your savings will have to be spent on his or her care. No. With proper planning, you can keep half of your combined “countable” resources up to a maximum amount which is determined by the government each year. In some circumstances, you may be able to protect nearly all of your life savings. In fact, it is often possible to protect more than the maximum amount. “Countable” resources are those resources such as cash, checking accounts, savings, CDs, stocks, and bonds that the government considers available to be spent on the cost of nursing home care.
Misconception #12: If you give money to your children, you will not be eligible for Medicaid benefits. Not entirely true. Such a gift will not make you ineligible if you made the gift more than 60 months before you seek Medicaid benefits. If you make gifts within the 60-month time period, you will be ineligible for Medicaid benefits for one month for every approximately $8,000 (this amount usually increases annually) transferred. This penalty will not begin to run until you are otherwise qualified for Medicaid benefits. However, in some circumstances, you can make gifts without suffering any penalty.
Misconception #13: If you apply for Medicaid, the Pennsylvania Department of Public Welfare (DPW) and the nursing home staff will guide you through the process. Sometimes, but generally not in your favor. Also, they may not be able to advise you about when to appeal a denial. Applications for Medicaid require extensive documentation and can be quite time consuming, often beyond the ability of DPW and nursing home staff to stay involved. An elder law attorney is the best resource for going through this complex process.
The third part of this series on medicaid planning is now available.