As elder law attorneys, we counsel clients that are preparing for the eventualities that they will face when they attain senior citizen status. The United States Department of Health and Human Services tells us that 70 percent of people that are at least 65 years of age will eventually need help with their activities of daily living. A significant percentage of them will spend time in nursing homes.

We are all aware of the fact that Medicare is a government health insurance program that is intended to provide a health insurance underpinning for senior citizens. Since its purpose is to address the needs of elders, it would be logical to assume that it will pay for nursing home care. Many people would say that it really does not make sense, but in fact, Medicare will not pay for long-term care.

This is something to take very seriously when you consider the fact that most seniors will need living assistance at some point in time. Nursing homes are extremely expensive, and it is probably going to get worse before it gets better according to experts that are doing research.

Genworth Financial is a company that sells financial products that can be useful for senior citizens. Since this is their targeted demographic, they keep a finger on the pulse of the current state of long-term care costs in the United States, and they publish their findings on their website. There are numbers for the country as a whole, and they also drill down state-by-state, and they look at individual cities within states.

We practice in the greater Rochester area, and according to their research, the median annual charge for a private room in a Rochester nursing home in 2017 was a whopping $153,592 per year. This is an eye-catching figure to say the least, but things could be much worse if you need long-term care in 10 or 20 years. They expect the costs to rise by 6 percent each year over the next five years.

If you are willing to sacrifice some privacy for a bit of savings, you could go with a semi-private room, but you would still be looking at some big numbers. The median annual charge for a private room in our area last year was $128,845, and they anticipate a 4 percent per year increase.

Nursing Home Asset Protection

As you can see, an extended stay in a nursing home could potentially consume all or most of your legacy, especially when you multiply these figures by two if you are married. Fortunately, there is a widely embraced solution in the form of Medicaid. This jointly administered state/federal government health insurance program will pay for nursing home care.

Of course, Medicaid is intended for people with very sparse financial resources. There is a low asset limit that you must stay within to obtain eligibility. The limit is higher in our state than it is in many others, but it is still quite modest at $15,150. The good news is that there are some assets that are not considered to be countable for Medicaid eligibility purposes.

If you own a home, it would not be counted, but there is an equity limit of $858,000 in New York in 2018. When a healthy spouse is remaining in the home, there is no equity limit at all.

A vehicle that is used as a primary form of transportation is not counted, and wedding rings, engagement rings, and heirloom jewelry are not countable assets. Household items and personal effects are not counted, and an applicant may have up to $1500 of whole life insurance coverage.

When it comes to assets that are countable, people typically engage in a process called a Medicaid spend down. You can do this by giving gifts to your loved ones, and you can alternately convey assets into an irrevocable Medicaid trust. The latter course of action is appealing to many people, because you can continue to receive distributions of the trust’s earnings until and unless you apply for Medicaid to pay for nursing home care.

This can be an effective strategy, but you have to be aware of the five year look-back period. You must complete your gift giving at least 60 months before you submit your application. If you were to violate this rule, your eligibility would be delayed.

Attend a Free Workshop!

If you would like to learn more about Medicaid planning and other important topics, attend one of our upcoming workshops. They are being offered free of charge at the present time, and you can visit our workshop schedule page to get all the details.