Nursing homes are expensive. If you’re visiting with the nursing home admissions office, you know that the out-of-pocket costs can quickly reach five digits. In fact, at an average of $180 per day in Iowa, paying $60,000 per year is not only likely, but it’s almost guaranteed. Staring that number in the face can make your stress level rise pretty quickly.
Naturally, you’re going to ask the nursing home social worker what your payment options are. They’ll probably mention long-term care insurance and Medicaid as alternatives to paying out of pocket. Obviously long-term care insurance is out of the question, but you’d like more information about applying for Medicaid.
Unfortunately, the state incentivizes nursing homes to encourage or even insist that you deplete your hard-earned life’s savings to pay for your care. Nursing homes are being put in a position where they simply can’t talk to their patients about Medicaid eligibility planning. As a result, there are a few things the nursing home social worker may not tell you.
You Can Spend Money to Save Money
Perhaps the single, most common misconception out there is the idea that you have to spend all your money at the nursing home before you apply for Medicaid. Quite honestly, it’s not even a misconception. It’s completely false.
The reality is that the rules specifically allow you to keep many types of assets. For the things you can’t keep, there are a number of ways to give them to your loved ones without jeopardizing your ability to pay the nursing home. If you don’t want to transfer the assets out of your hands, you can often change an asset from countable/non-exempt to non-countable/exempt by changing the form of investment, annuitizing it in compliance with the Medicaid rules, or spending it on goods and/or services you and your family need.
Getting Your Kids Off the Hook
As a long-term care planning lawyer, I regularly talk with people whose parents are in need of nursing home care. In these situations, Dad (usually) has passed away and Mom is declining mentally or physically. Mom’s adult children are not in a situation that would allow Mom to move in with them, but Mom can’t live alone any longer either. One of Mom’s kids has been designated as her power of attorney, and is working with the nursing home to have Mom admitted.
If this describes your situation, I want to tell you two things.
First, don’t let anyone at the facility talk you into agreeing to pay Mom’s nursing home bill. Read the admissions paperwork carefully. Watch for words like “responsible party” or “third-party payor.” If you read something that makes you nervous, ask the admissions person to explain it.
Second, if you are acting as Mom’s power of attorney, always sign your name in a way that makes that clear. The Iowa Statutory Power of Attorney form recommends this language:
“Jane Doe [Mom’s name] by John Doe [your name] as Agent”
You can substitute the term “power of attorney” or “POA” for the word “Agent” as well, but make sure your role as the designated agent under the power of attorney is clear.
If you sign using only your name, the nursing home could pursue you and your personal assets to pay Mom’s nursing home bill. However, if you sign as agent, the nursing home has no way to claim you should be personally liable. While many states have statutes that require family to pay for a poor person who cannot pay for themselves, Iowa recently repealed their version of this statute in a bill titled SF 223 which was signed by Governor Brandstad on March 31, 2015.
Adjustments Will Be Made
Nursing home bills are figured by the day. In Iowa, a semi-private (meaning, “shared”) room has an average per-day rate of $175. That computes to an average monthly bill of $5,323, and an average yearly cost of $63,875.
By contrast, the average Medicaid daily rate is $167.87, which amounts to a savings of $287 per month and $2,602 annually.
Add to that the fact that Medicaid is also a health insurance which covers prescriptions and incidentals that would otherwise be paid out-of-pocket, and your savings go up, often by $20-30 per day or $7,300 – $10,950 per year.
How does knowing this help? Medicaid acts like an insurance adjuster. When you visit the doctor, you pay a co-pay and your health insurance negotiates the final bill for you. Where a CT scan might have a standard charge of $10,000, your insurance company can negotiate the final bill down by 80% or more, reducing your out-of-pocket expense. Medicaid has the same effect on your nursing home bill.
Knowing is Only Half the Battle
Even if your nursing home social worker both knows all these facts and communicates them to you, the nursing home is just not capable of putting together a comprehensive, effective plan. Add to the mix a spouse who doesn’t need nursing home care or a disabled adult child, and you increase the complexity of the planning tenfold.
But what if the nursing home tells you your general practice lawyer can help you make a plan? Unfortunately, while a general practitioner has a great breadth of knowledge of the law, he simply doesn’t have the “deep-dive” knowledge needed to make the Medicaid rules work for you rather than against you. A general practice lawyer will be knowledgeable about the five-year lookback and the $2,000 asset limit, but they won’t be able to tell you whether or not a community spouse can keep all of her income (she can).
Effective Medicaid Planning, whether done well in advance or immediately upon entering a nursing home, can only be done by someone who is an expert in the huge variety of state and federal Medicaid rules and regulations. This expertise is especially critical in Iowa where the state has an aggressive estate recovery program. Planning for Medicaid coverage isn’t just about getting you eligible. It’s also critical to understand how the state will recoup the money it spends on your behalf. An expert will know which tools to use to both achieve Medicaid eligibility and protect assets from estate recovery after death.
The Choice is Yours
Even though they’re spread over hundreds or thousands of pages of the federal and state codes, the Medicaid rules must be read together as a single unit. Doing so reveals a number of planning tools that a Medicaid expert will use in combination with each other.
The list of potential planning tools is extensive; there are more than 20 possible options! But each tool has a specific, appropriate use which depends on many factors. Are you married or single? Do you have a disabled adult child? How many children do you have, and where do they live? Do you have sizable retirement or investment assets? Are you a retired or active farmer? These are just a few questions a Medicaid Planning lawyer will ask you to determine what’s right for your situation.
Make Informed Decisions
Nursing home employees are compassionate and caring. They do a job I don’t think I could ever do myself, and we need them to help preserve the dignity of our aging population. They’re experts at providing physical care for people who can’t care for themselves. But they’re not experts at planning for the financial transition and even burden that goes with living in a long-term care facility. They aren’t Medicaid planners. In fact, they would probably prefer it if you didn’t plan for Medicaid since Medicaid reduces the rate they can charge for their incredibly important services.
Now you know you have options. Talk with a Medicaid expert before you talk to the nursing home admissions or social worker. That way you can go into the entrance interview armed with knowledge they won’t be giving you as you make decisions about where, how, and when Mom should receive her care.
