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Planning for Payment of Nursing Home Costs

Nearly anyone who is a long-term care resident of a skilled nursing home can immediately apply for Medicaid to pay for the care.   To do so, an applicant who is not yet impoverished must shuffle assets according to a complex method which has been approved by federal courts.  The reward for doing this can be a savings of around $100,000 per year in nursing home costs.

Most married couples have an opportunity to get Medicaid immediately. Federal law allows the shuffling of assets to benefit the spouse who is not in the nursing home.  Single individuals may be permitted to apply immediately, but may have to wait a period of time before receiving the benefit.  The complicated process involves the use of a specific insurance product which is not widely available.   Under current law, it is usually possible to save a bit more than half of an individual’s net worth.

When it comes to politics, I am a fiscal conservative. But when it comes to long-term care, I am a guide and advocate, not a politician.  Federal courts have heard numerous cases brought by Pennsylvania and other states to challenge the techniques that elder law attorneys use to accelerate Medicaid eligibility for long-term care.   Federal courts have ruled conclusively that, until Congress changes the current law, the techniques we employ are legal.

It is hard to put an absolute dollar amount on how large an individual or married couple’s net worth may be and still be able to qualify for Medicaid. A million dollars is not necessarily too much, but at some point, a net worth can be too large.  Immediately applying for Medicaid can be an option for probably 90% of the population after the applicant goes through the process of re-characterizing assets or “accelerating the spend-down.”

There are some cases in which an accelerated spend-down would be impractical or excessive. Objective analysis on a case-by-case basis will determine whether accelerating the spend-down will be practical and result in saving a significant amount of money.  To determine whether a spend-down is excessive requires experience and current knowledge of what might invite challenge within the long-term care system, and what will not.

Few people are wealthy enough to withstand several years of paying for skilled nursing care at a cost of around $10,000 per month locally.   It is a shock to many middle-class families that, after a maximum of 100 days, Medicare will not pay for care in a skilled nursing home.  Unfortunately, relatively few people have prepared by purchasing long-term care insurance.  An accelerated spend-down has become the solution for the relatively few who are aware of it.

The long-term care system is at best confusing. Nursing homes have no duty to explain to residents that it is legally possible for them to accelerate the spend-down process to get the Pennsylvania Department of Human Services (DHS) to pay for their care.  Since the amount of Medicaid-subsidized payment by DHS to a nursing home is about 70% of the rate that is charged to persons paying privately, promoting the accelerated spend-down has the effect of reducing the nursing home’s net operating income.

Pennsylvania’s payment and reimbursement system in relation to long-term care seems to short-change nursing homes, and this has a detrimental effect on innocent consumers who pay privately. Obviously, if a nursing home is getting only 70% from DHS of what they get from patients who pay privately, that shortfall needs to be offset by a surcharge to those who pay privately for care.  That might explain why, according to Genworth Insurance, Pennsylvania’s average cost of skilled nursing care in 2016 was 33% more than the national average.

Many persons have the mistaken belief that the quality of Medicaid-funded long-term care is not as good as care which is paid for privately. That’s not true.  Every skilled nursing home our area accepts Medicaid as a source of payment.  Providing a different level of care because of the source of payment would violate federal and state laws.  It is impossible to walk through a nursing home and know whose care is being paid for by Medicaid and whose is not.

In 2014, Pennsylvania followed a national trend and changed the name of the agency which administers federal Medicaid dollars from the Department of Public Welfare to the Department of Human Services. This change came decades after “the County poor house” became Claremont Nursing & Rehabilitation Center, which is a high quality nursing care facility that offers a level of nursing care that rivals the most expensive retirement communities in the area.   Terms like Welfare, County Home and Medicaid might carry an historical stigma, but that should no longer influence a wise person who is choosing a nursing home and deciding how to pay for long-term care.

Unless your family has a loved one in a nursing home and is facing a dual-whammy of emotional distress and financial devastation, the notion of getting government aid to pay for care might seem distasteful and inappropriate. Some families try to do-it-themselves.  Often we hear from families who made multiple gifts of up to $14,000 per year, or have retitled a house according to a recommendation of a well-intentioned advisor, only to discover that when the parent eventually exhausted all resources and applied for Medicaid, they were told that they would need to find another way to pay tens of thousands of dollars before getting the benefit.  In such cases, the filial support laws of Pennsylvania make adult children financially responsible.

David D. Nesbit, Attorney