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 $170.50 per day for the next 80 days (in 2019). This means that if Medicare coverage continues for the entire 100 days, the beneficiary will pay $13,640 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.
To be medically eligible for ALTCS, “a person shall have a nonpsychiatric medical condition or have a developmental disability [cognitive disability, cerebral palsy, seizure disorder, or autism, and who have significant impairment of their functional abilities] that, by itself or in combination with other medical conditions, necessitates the level of care that is provided in a nursing facility or intermediate care facility.”
This does not mean that the ALTCS applicant has to live in a nursing facility. “Level of care” refers to the intensity of medical care, not the location where it is provided. It means that the applicant’s need for medical care must be comparable to that provided in a nursing facility, but below an acute care setting (hospitalization or intense rehabilitation) and above a supervisory/personal care setting, intermittent outpatient medical intervention, or benevolent oversight.
Medical eligibility is determined by the Pre-Admission Screening (PAS) process. The PAS consists of a personal interview that takes place where the applicant resides and a review of the applicant’s medical records. The assessor needs to see the applicant in their normal living environment to get an accurate picture of where they are medically and functionally. The PAS tool is the document the assessor uses to determine the functional, medical, nursing and social needs of the applicant.
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 $2,313 per month
- Income of Married Person: one of the following must apply:
- Total income of both spouses is limited to $4,626 per month, OR
- Total income received by applicant plus half of income received in joint checks, is limited to $2,313.
(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 $126,420 in value.
(Resources do not include: home (except a home in trust), 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 cost and/or payment toward room and board may be required. If the ALTCS recipient is living in a nursing facility, ALTCS determines the “share of cost” based on the gross income of the ALTCS recipient minus certain deductions allowed under federal and state law, including:
- A personal needs allowance set by federal law
- Amounts for health insurance premiums paid by the recipient
- Amounts for medical expenses not covered by ALTCS (e.g. eyeglasses, hearing aids, and dental work),
- Community Spouse Monthly Income Allowance (if the spouse’s income is less than a federally determined minimum amount)
If the recipient is living in a residential facility, the ALTCS program contractor determines the room-and-board charge based on the recipient’s gross income.
If a share of cost or room-and-board charge is assessed, the recipient (or their agent, guardian, or conservator) will need to write a check from their income each month to pay the facility.
If the ALTCS recipient lives at home, they are not required to pay toward the cost of their care unless an income-only trust is necessary because their income exceeds the ALTCS limit.
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 trust authorized under federal Medicaid law that allows an individual whose income exceeds the ALTCS limit, but who cannot afford to pay privately, to qualify and receive benefits. This is also called a Miller Trust after the court case that initially authorized these trusts.
- Special Needs Trust – this allows another person (the trustee) to manage the property of a beneficiary who has a disability; the beneficiary’s resources are protected even though they are receiving ALTCS 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 a stream of income.