In recent years, the cost of long-term nursing home care has skyrocketed. To explore the questions and choices that arise when a loved one needs long-term nursing home care, let’s use the example of Frank and Susan Yazzie. Mr. and Mrs. Yazzie have two children, David and Jennie. Frank Yazzie is 80 years old and may need to go to a nursing home.
How to Pay for Nursing Home Care
There are basically three ways to pay for the cost of a nursing home: (1) long-term care insurance; (2) private payment; and (3) Medicaid. Unfortunately, long-term care insurance has only become popular in the last few years and most people facing a nursing home stay do not have this coverage. The average cost of nursing home care in New Mexico is around $5,000 a month and few people can afford a long-term stay in a nursing home on a private pay basis. Medicaid is a governmental benefits program which is primarily funded by the federal government and administered by each state. Medicaid provides the most common means of payment for long-term nursing home care.
Who Qualifies for Medicaid?
In order to qualify for Medicaid, applicants must pass fairly strict tests on the amount of income they receive and the amount of assets they own.
The income eligibility figure for New Mexico in 2009 is $2,022 per month. If Mr. Yazzie’s income exceeds $2,022 per month, there are still two ways to qualify: (1) averaging his income and Mrs. Yazzie’s income to see if the average of the two is less than $2,022; and (2) an Income Diversion Trust.
There is a whole host of misconceptions about asset eligibility for Medicaid. The house and a few other assets are generally exempt. Non-exempt assets are limited to $2,000. Although the house is exempt, the Yazzies should consult an attorney to protect the house from recovery by Medicaid when Mr. Yazzie dies.
Asset Eligibility – Can a Person Qualify for Medicaid by Giving Their Property Away?
The Yazzies should consider gifting to their children, David and Jennie, but need to seek legal advice on the rules that apply to gifting. Generally, there is a five year look-back period with regard to any gifts. A monthly gifting program might be appropriate, but the rules that apply to that gifting program are based on the average cost of a nursing home in New Mexico and not the $11,000 a year rule that applies to gifting for estate tax purposes.
Does the Healthy Community Spouse Have to Give Up Her Income and Assets in Order for Her Spouse to Gain Nursing Home Care?
The healthy “community spouse” has been afforded some protection by the Spousal Impoverishment Act passed by congress. The community spouse is entitled to receive both a monthly income allowance and a resource allowance. When it becomes clear that Frank Yazzie needs long-term nursing home care, the Yazzie family should consult an attorney and seek an initial resource assessment from a Medicaid caseworker. After obtaining an initial resource assessment, they should develop a “spend down” strategy to maximize the income and resources available to Mrs. Yazzie, and ultimately to her children, David and Jennie.