The cost of long term care can be overwhelming, not just financially, but physically and emotionally as well. Knowing what our client’s medical conditions, needs, and challenges are is critical in determining what benefits and services may be available to them and what issues may impact the medical care plan and estate plan. Utilizing legal and financial strategies, we formulate a personalized long term care plan for our clients at a comprehensive initial consultation.
Long term care is expensive. In Arizona, the annual median cost of nursing home care is $75,555 for a semi-private room and $93,075 for a private room (Genworth Cost of Care Survey, 2016). The very wealthy can afford to self-insure and pay for nursing home care indefinitely. The impoverished can easily qualify for the Medicaid program. Middle class individuals have enough money to worry about, but not enough to pay for long-term care for an extended period of time, so planning for long term care expenses is essential.
The team at the Law Offices of Chester B. McLaughlin, P.C. works with you to develop a personalized long term care plan that considers both legal and financial strategies. We can help you preserve assets and qualify for government assistance. And our staff is able to prepare and process the ALTCS application for you.
Ways to pay for long term care expenses include:
Unfortunately, Medicare coverage of long term care expenses is extremely limited. In general, Medicare may cover up to 100 days of nursing home or home health care (for a homebound individual), after a three-day minimum inpatient hospital stay related to the illness or injury for which skilled care is needed. For nursing home care, Medicare covers the entire cost of the first 20 days of each benefit period; however, there is a copayment of $164.50 per day for the next 80 days (in 2017). This means that if Medicare coverage continues for the entire 100 days, the beneficiary will pay $13,160 out-of-pocket unless they receive coverage through a Medicare Advantage Plan. In some cases, the Medicare Advantage Plan charges higher copayments for nursing home care than Original Medicare.
Medicare also provides hospice care for individuals who are certified as terminally ill with less than six months to live if the illness runs its normal course and who elect to receive their Medicare services through hospice. Medicare hospice does not cover nursing home or assisted living room and board costs.
A reverse mortgage gives senior homeowners access to a portion of their home’s available equity to allow them to continue living in their home without having to pay monthly mortgage payments. The money the homeowner receives from the reverse mortgage can be used to pay for in-home medical care or institutional care for a spouse. The payments can be used to supplement other private and public benefits. Reverse mortgage payments are not counted as income for most public benefits programs and if the homeowner chooses to receive monthly payments or take out a line of credit instead of getting a lump sum, the payments generally do not affect resource eligibility either.
Long term care insurance is a medically underwritten insurance policy. Certain health conditions could prevent you from qualifying for long-term care insurance, such as the onset of Multiple Sclerosis, Parkinson’s, dementia, or a disability like a stroke. Each carrier sets their own health qualifications. The benefits become available upon triggering event expected to last 90 days. Long term care insurance is not just Nursing Home Insurance – the majority of benefits are paid for services received at home, but it covers a variety of venues and service providers. Long-term care insurance policies are issued to applicants between the ages of 18 and 85 depending on the product and carrier, but the ideal age range is 45 to 60. The younger a person is when they purchase the coverage, the lower the premium but the longer they will have to pay the premium. The average annual premium costs for long term care insurance for a person aged 55-59 are $1,764 (low), $2,398 (medium), and $6,939 (high). The price is affected by the deductible or elimination period you choose as well as the term of coverage. The policy will pay when certain triggers are met which include not being able to do two of five activities of daily living or serious cognitive impairment. Qualified long term care insurance premiums are also tax deductible.
While we are not financial advisors, we often see people keeping large amounts of money in bank accounts with little or no interest (or even in a safe in their home) and/or paying interest on debt that is higher than the rate of return on their accounts and investments. Paying off these debts and investing funds in low-risk, higher-interest accounts can increase the funds available to pay for long term care. While this is not a cure-all, it may delay the need for public assistance a bit longer.
Why does Arizona have its own long term care system instead of Medicaid? Medicaid is a joint federal-state program, but in 1981, Arizona approved and funded its own program, called the Arizona Health Care Cost Containment System (AHCCCS). It is a prepaid managed care system under Medicaid.
In 1989 the Arizona Long Term Care System (ALTCS)—a division of AHCCS—was established. This office offers long term care, acute care and home-based services to the elderly and physically or developmentally disabled of Arizona who qualify for assistance. One of its purposes is to help limit costs of long term care and simplify the processes for residents needing long term care services.
To be eligible for benefits from Arizona’s long term care program, a person must meet both medical and financial requirements. Any person receiving benefits from the Medicaid program must re-qualify every year, because program requirements and living circumstances can change.
Include the following:
- Requires nursing care by a nurse or under the supervision of a nurse on a daily basis
- Requires medical monitoring
- Has impaired mental function
- Is not able to fully take care of oneself, as related to normal daily living activities
- Psychosocial problems
Include the following and can change from year to year. Note: pre-nuptial agreements and community property agreements do not apply when considering financial requirements:
- Income of Single Person: limited to $2,205 per month
- Income of Married Person: one of the following must apply:
- Total income of both spouses is limited to $4,410 per month, OR
- Total income received by applicant plus half of income received in joint checks, is limited to $2,205.
(Income includes Social Security pay-outs, pension money, annuities, disability insurance, and more).
- Resources for Single Person: limited to $2,000 in value.
- Resources for Married Person: For a married person applying solely, their spouse may keep half of the property of both. Their half cannot exceed $120,900 in value.
(Resources do not include: home, vehicle, burial arrangements, burial plot, household goods and personal possessions, or life insurance with cash value less than $1,500).
If you or a loved one is receiving benefits from Arizona’s Medicaid program, a share of costs and/or payment toward room and board is required. The actual share of costs depends on the type of facility in which the person is living and their income, for example:
- Certain expenses can be deducted from share of cost and include a stipend for living expenses, medical expenses not covered by benefits (eyeglasses, hearing aids, and more), spouse support, etc.
- The recipient may be required to write a check from their Social Security income each month to pay the nursing home or facility where they are living, but the state will not garnish all of the Social Security income
- If they live at home, they are not required to pay
During our initial consultation, our team determines the best way to develop a personalized long term care plan that includes options for protecting as much of your income and property as possible. Our strategy for preserving assets could include the following:
- Income Only Trust – a vehicle that allows an individual whose income exceeds the allowed under the ALTCS program to still qualify and receive benefits.
- Disabled Person’s Trust – also called a special needs trust, this allows another person (the trustee) to manage a disabled person’s (beneficiary) property; the beneficiary’s property and resources are protected even though they are receiving AHCCCS benefits.
- Annuity – a single premium annuity in some circumstances can be an easy way to preserve assets. While not commonly a viable option for single people, it can be very advantageous for married couples. The annuity turns resources into instant streams of income that do not delay or disqualify an applicant from receiving Arizona long term care benefits