The need for affordable long-term support services in America has increased dramatically. Costs are exorbitantly expensive whether you struggle to pay premiums for a long-term care insurance policy or monthly bills from a nursing home. The US Department of Health & Human Services (HHS) finds that Americans aged 65 or more have a 70 percent chance of requiring long-term care services.* Family members also absorb these costs for their loved ones at the peril of their financial well-being because Medicare does not cover long-term care. As a result, many Americans turn to Medicaid as the solution to the prohibitive cost of long-term care.
Many aging Americans believe Medicaid coverage for long-term care kicks in only after they become impoverished to meet qualifications for the program. It is true that Medicaid for long-term care has a resource limit (as well as an income limit). But you do not automatically have to sell your home to qualify for Medicaid. However, this does not mean your home is completely protected.
Medicaid does not count the home of a program benefits applicant as an asset when determining program eligibility as long as the resident intends to return to that home. Some states will require proof of the likelihood of returning home. Additionally, for the year 2021, the resident's home equity must be less than $603,300 (in some states, $906,000). This number calculation considers the home's fair market value minus any debts secured, such as a mortgage or home equity loan.
Many find the news that their home need not be sold a welcome relief. But too often, that celebration is premature. In some states, your home is the key asset that could be used to pay the state back for what it spent on your care. Florida has great protections for one's homestead if estate planning is handled correctly. And in Texas, other protections are in place depending on who else lived in the home. If planning is not handled carefully without those situations, then the home's equity could be lost through a Medicaid estate recovery action.
The Omnibus Budget Reconciliation Act of 1993 required state Medicaid programs to recover some of the cost of care provided from a deceased recipients' estates (in many cases including home equity). In essence, the law says you will not be financially wiped out if you need long-term care; however, in the absence of a qualified surviving dependent's need, your estate will pay back the cost of your care. The goal was to protect the dignity of those who did not plan to pay privately for long-term care, but this meant . But after that person who needed Medicaid to pay for long-term care passes away, those funds could be sought.
US seniors hold $8.05 trillion (McKnight's Senior living reports that 78.7 percent of the 54 million elderly Americans own homes.) home equity. Attaching government compensation on the backside (meaning your death) of having provided long-term care constitutes repayment of sorts to the government.
Recently, the Medicaid and CHIP Payment and Access Commission (MACPAC) recommended that Congress make Medicaid estate recovery voluntary. This recommendation reduces potential recoveries and limits reimbursement prospects based on Medicaid-managed hardship care cases providing waivers on aspects other than financial hardship. Ultimately this proposal will increase federal expenditures and reduce the funds available to Medicaid. Already states tend not to seek recovery via estates unless the return is more significant than recovery cost.
It seems to be good news that estate recovery could go away. But we still need a way to pay for long term care. The partnerships between state and federal governments to provide long-term care coverage through Medicaid are financially unworkable in their present form. This program operates at a loss, and long-term care is the program's most expensive benefit. And in the long run, decimating the ability for Medicaid to recover some repayment from an asset pool of 8 trillion dollars can potentially bankrupt the Medicaid program itself. This could be dreadful.
Instead, we have a need to strengthen America's long-term care social contract. Americans need public-private partnerships to rethink the handling of long-term care in this country. The middle class, in particular, needs a way to pay for long-term care without having to rearrange their finances to qualify for Medicaid. It is incumbent upon the US Congress to find ways to protect its ever-growing senior population without bankrupting the social safety nets put in place for their protection.
McCreary Law Office assists clients in planning for future long-term care needs by using proactive planning to set aside money to help supplement their care later in life. This complex planning can help save families significant amounts while also protecting assets from other potential risks. If you would like to learn more, contact an elder law attorney or contact McCreary Law Office or call the Jacksonville, FL office at 904-425-9046 or the Houston, TX office at 713-568-8600.
*A study by the Urban Institute commissioned by HHS finds that American men turning 65 in 2020-2024, on average, will require 2.3 years of long-term care while women will require 3.2 years.
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