People are living longer than in generations past, so planning for an extended retirement has become a concern for many people. As part of an estate planning discussion with their attorney, many clients also ask: “What happens to my estate if I need assistance with long-term care?”
In the United States, Medicare is the federal health insurance program available to all people over the age of 65. Although the program does offer many benefits, Medicare does not cover nursing home care. The average cost of nursing home care, also called “skilled nursing” or “convalescent care,” can be as much as $12,000 per month. Many people do not have the resources to cover these steep costs over an extended period of time without some form of assistance. Therefore people who need assistance frequently turn to another healthcare program – Medicaid.
Medicaid is a federal health program intended to help individuals and couples pay for the cost of healthcare and nursing home care. This program is geared towards individuals with low to moderate income and/or limited financial resources. Each state administers this program and refers to it by a different name. For example, in Massachusetts, the program is referred to as “MassHealth.”
Qualifying for Medicaid can be complicated. Despite being a federal program, each state has its own rules and guidelines for eligibility. Once an applicant is qualified to be a “recipient” of the Medicaid program, a patient paid amount, commonly known as “PPA”, will be determined. The PPA is the recipient’s share of the cost for the nursing home care. The PPA is generally based on a variety of factors including the recipient’s monthly income and health insurance premium deductions. The PPA also factors in whether a spouse is living at home, or if the recipient is determined to need only short term nursing home care. The application process requires complete and thorough documentation of all assets and income before an eligibility determination is made. For married persons, the qualification includes an evaluation of assets and income belonging to both the institutionalized spouse (the person actually needing the assistance) and the community spouse (the person who may not currently need health assistance).
At the end of the Medicaid recipient’s life, MassHealth will begin “estate recovery” for the total cost spent on the recipient during his or her lifetime. This estate recovery is referred to as the lien against the decedent’s estate. This lien comes in the form of a bill to the estate. If there is any real estate property owned by the decedent, MassHealth will also place a lien on the recipient’s home, if it has not already done so, in order to satisfy the debt (subject to a few exceptions). Many estate beneficiaries discover this debt only upon the death of a parent or loved one. It is possible that the MassHealth debt can consume most, if not all, of the estate assets.
There is a bright side however. There are estate planning strategies available to help prepare for long-term care in a manner which may avoid your estate having a Medicaid lien. Beginning a discussion of your long-term care plans early, with an estate planning attorney, can help determine if such strategies will work for you, and your needs. If you do foresee the possible need for MassHealth assistance, an attorney that concentrates in both estate planning and elder law can help you to navigate through the application process, and explain how qualifying for Medicaid affects your estate. Your attorney can also provide guidance to your beneficiaries so that they fully understand how the estate recovery process works, and what rights they have as beneficiaries of your estate.
Nobody can predict the future, however you can do your best to plan for it. Speaking with an estate planning and elder law attorney will allow you to evaluate your long-term care planning options before you need to exercise them.