Aging Crisis in America

Who pays for long term care when someone goes into a nursing home? If you’ve planned ahead and have purchased long term care insurance for such an event, your worries are diminished. If not, then you have few choices. Many people are under the misconception that Medicare or their health insurance will pay for long term skilled nursing care. This is not the case.

Medicare will pay for the first 20 days after a minimum three day stay in the hospital, but if care is still needed, who pays for it? Some supplemental health insurance policies will pay an additional 80 days. However, after the 100th day of care, the nursing home resident has only two options for payment…as a ”private pay” patient or qualify for Medi-Cal benefits.

Take for instance John and Mary, who had a happy life together upon John’s return from Europe after serving in World War II. They worked hard to buy a home, raise their children and save enough money to have a comfortable retirement. They were proud to have achieved the “American Dream.”

Soon after John’s retirement he started to change. His doctor eventually diagnosed him with “senile dementia”. After two difficult and strenuous years of caring for her husband, Mary’s doctor advised her that she should no longer care for John at home and that he needed to be placed in a nursing home. Mary was very reluctant to do this until one day John fell down the steps of their front porch. Mary quickly realized she was too small and weak to lift John up into the house. She called the ambulance and their lives were changed forever. John had suffered a broken hip and eventually required physical therapy. After many weeks of therapy, it was obvious that Mary would have to accept the fact that she could not care for John in their home. John was transferred to a skilled nursing care facility near their home which cost nearly $5800 per month.

Not only was Mary devastated that her husband needed nursing home care, but she was surprised to learn that neither Medicare nor their supplemental health insurance would cover long term skilled nursing care. Now Mary feared that all her assets, including her home and life savings, would soon be gone due to the cost of skilled nursing home care for her beloved husband. Long-term care insurance would have helped had they purchased it when they were healthy, but like most retirees they could not afford the premiums.

Mary’s only option, other than impoverishment, was to access Medi-Cal. Medi-Cal is a federal and state program that can pay a share of skilled nursing home costs for those who meet the eligibility requirements. Medi-Cal is a privilege that tax-payers have funded by paying their income taxes year after year since 1965. With proper planning, before or even after a skilled nursing home residency, John will be able to qualify for some level of benefits for Medi-Cal and Mary will be able to comfortably stay in her home and have sufficient income and assets for herself.

Qualification for Medi-Cal benefits will depend on the value and type of assets a person owns, their income, and marital status. The Medi-Cal benefit will depend on the need and the cost of care in their area. Current law allows you to rearrange your assets in order to qualify for Medi-Cal benefits.

Medi-Cal benefits can augment the cost of extended care and save thousands of dollars. Please note that transferring assets to anyone other than your spouse could cause you to be disqualified from benefits for a period of time. Also, transferring assets to a revocable Living Trust will not protect your assets and a transfer of assets to an Irrevocable Living Trust is subject to the transfer rules and period of ineligibility.

Exceptions to the Medi-Cal regulations can be maximized by an expert in this field, avoiding the ineligibility period. Medi-Cal benefits are not automatic and you must properly arrange your assets prior to your Medi-Cal application. Professional advice in the form of “Medi-Cal Planning” will aid you in navigating the maze of rules and stringent requirements.