But Mom Won’t Live to 100 – or Will She? (Part 2)
March 28, 2011
Last week we were discussing Mary and her mom. Mary opted not to do long term care planning for her mom at age 95. At age 100 she called me again. We met and Mary asked me, again about long term care planning. I told her that Mom would need to live 5 years, now to 105, and spend about another $600,000 (costs had gone up) before we could apply for Medicaid. Mom was now down to $800,000.
Mary’s response was, “I guessed wrong the first time, so, although I don’t think she will live to 105, I will plan against that risk.” Mary was especially concerned because she was an only child, had divorced her husband a number of years ago, and did not have much in the way of assets herself. “Mom had always planned to leave me enough for me to survive on when she’s gone”, Mary related.
Well, the rest of the story is that Mom made it to age 103. We never did apply for Medicaid. But, looking at it in hindsight, had Mary made the decision the first time we met, Mom would have been on Medicaid at age 100, saving approximately $360,000.
You might ask “why should Mary get this windfall? She is cheating the government.” But, is that really the case? Mary now has about $250,000, not a whole lot for someone who is on a fixed income and could live another 20 to 30 years. Mary may well find herself living in poverty, needing government handouts years before she ever might need long term care.
The lesson to be learned is that planning isn’t about predicting what is going to happen. It’s like buying insurance. I buy life insurance to protect my family should I die. I am buying peace of mind, protection against a scenario that could occur. I am not “betting” on my mortality. If I don’t die while the policy is in force I won’t be upset that my family didn’t “collect”.
It’s the same thing with long term care planning. If thoughts of nursing home care are keeping you up at night or occupying your thoughts during the day, you ought to manage that risk. Most 95 year olds don’t make it to 100, especially when they are at a nursing home care level. Mary thought her mom wouldn’t make it either. But, in the end, her mom wasn’t like most 95 year olds.
“But Mom Won’t Live to 100 – Or Will She?”
March 21, 2011
Quite often when explaining long term care planning to the family member of an aging senior, specifically when I mention the 5 year Medicaid look back, the person will tell me that “Mom won’t live that long”. Of course, no one can predict the future with any certainty so, logically, that statement is opinion and not fact. But, it reminds me of a client I first saw a few years ago. I now retell her story frequently.
Mary’s mom was already in a nursing facility when she came to see me. Mom was in spend down mode, paying privately for nursing home care, at the rate of about $100,000 per year. She had $1.2 million in assets and minimal Social Security of $500 per month. Oh, and she was 95 years old.
Her situation was pretty simple and straight forward. She didn’t have long term care insurance. Her deceased husband wasn’t a veteran. She didn’t have any disabled children or own a home. I explained to Mary that Mom had two options, private pay and Medicaid, but all assets would need to be spent first before Medicaid eligibility could be an option, unless we did some very basic long term care planning.
I told Mary that we could move some assets to a trust. “But what about the Medicaid penalty and look back period”, she asked. I explained that Mom would need to private pay for her care for 5 years, approximately $500,000, before we could apply for Medicaid. We discussed the likelihood of Mom living to 100. I told Mary that while I agreed the odds were not good she would have to evaluate that risk herself and decide if it was worthwhile to plan for that possibility. She opted not to do the planning and thanked me.
Well, you know what happened, right? (Otherwise, I wouldn’t be telling you this story.) Mom did live another 5 years and Mary came back to see me when she reached 100. I’ll tell you all about that meeting in next week’s post.
Medicaid – The State’s Bizarro World
March 14, 2011
You may be a fan of Superman or, like me, Seinfeld, and so are familiar with the term “bizarro” or “bizarro world”. The term is part of popular culture. Wikipedia’s definition is a weirdly mutilated version of anything. I am fond of telling clients that entering the “Medicaid world” means one must throw out logic and lifelong habits which can get you in trouble when attempting to obtain Medicaid benefits. I explain to our clients that much of what we tell them to do is “counterintuitive” to what they have done their whole lives. They are entering the Bizarro World of Medicaid. Allow me to explain.
I had a conversation last week with a married couple for whom we are preparing a Medicaid application. John is in a nursing home and Mary is healthy and living at home. I explained to them that Mary can keep ½ of their countable assets, in their case $75,000, but that they must spend down to below that dollar amount by the last day of the month directly preceding the month we want to qualify John for Medicaid.
I have had this conversation numerous times with clients in John and Mary’s situation and know all too well that this simple instruction is not always followed. The largest part of most spend downs typically goes to the nursing home. But, as most people do, myself included, we wait till we get a bill before we pay it. If I owe you money, I’m not going to chase after you for a bill. Whenever you get around to it and invoice me then I’ll pay it. The longer the money stays in my bank account the happier I am.
However, this can get you into big trouble and cost you tens of thousands of dollars if you wait for the nursing home bill. If we want John eligible for Medicaid next month and we know that he owes the nursing home $20,000 for the past 2 months of care but they haven’t yet presented Mary with a bill, it makes no matter whether they legitimately owe the facility the money. If that $20,000 is still sitting in their bank account next month, causing their account balance to exceed $75,000, John cannot qualify for Medicaid. Even worse than that, he can’t ever qualify for next month. He has to wait till the following month, which means they will owe the facility another $10,000, leaving Mary with $65,000 to live on.
That is why we are so focused on getting our clients to change their habits, which isn’t easy to do. Their entire lives John and Mary have paid their bills, after the vendor presents them with an invoice. However, I tell them they must go bother the nursing home to bill them ASAP. Who chases after someone to whom they owe tens of thousands of dollars? That’s the way it goes in the Bizarro World of Medicaid and why entering this strange land without a knowledgeable guide can literally cost you tens of thousands of dollars.
The Danger of Acting on the Wrong Information
March 7, 2011
If you have ever struggled through the long term care system you know that getting accurate information is one of the most frustrating aspects. It seems the more people you talk to the more confusing and contradictory the process becomes. Acting on the wrong information can be costly. A call we received last week from Jim illustrates this point.
Jim’s mother has kept his father in their home with aides for the past two years but now, he is in the latter stages of Alzheimer’s. Mom is overwhelmed, stressed and concerned that money is running out. What will she live on? Jim is now assisting Mom in searching for a suitable nursing home and hoping to qualify for Medicaid because Mom is healthy and may outlive Dad by some years. She’ll need every dollar she can preserve.
Qualifying for Medicaid in the case of a married couple is complicated. Medicaid takes a snapshot of the couple’s countable assets as of the first day of the first month that the applicant spouse is continuously institutionalized. That number is then divided in half and the healthy spouse can keep one-half of the assets, but not more than $109,560 (this number is adjusted each year). The couple must spend down the rest of their assets to below $2000.
Jim reported to me that one nursing facility told him that his mom could give the facility advance payment of several months of nursing care at their private pay rate while they are applying for Medicaid. Once the application is approved (it can take 2 to 4 months and sometimes longer to receive word) the facility would refund whatever amount from that deposit they don’t need because Medicaid is then picking up the cost. So, for example, if they deposit $60,000 with the nursing home to cover the cost of the first 6 months and Medicaid says they will start paying from month 4 then the home would refund $30,000. Jim said it didn’t sound right to him. I told him he was absolutely correct.
What many don’t realize is that the money held by the nursing home on deposit is a countable asset so it affects both the snapshot or starting number and the target spend down or ending number. That money isn’t part of the spend down until it is paid to the nursing facility for services received. Medicaid doesn’t allow for payments in advance of services. If you “pay” the nursing home for 6 months all you have done is move your asset from your bank account to the nursing home’s bank account but it is still yours.
I explained to Jim that his mom could lose many months of Medicaid benefits, which could dissipate assets she will need for her own care. He was thankful that he called us when he did. We are now preparing his dad’s Medicaid application, guiding his mom through the process to insure that she will preserve what little she has left and the nursing home will be compensated for the care they provide.
