During the last few years, months, or weeks of your life, many of you will need the services of an aide or facility so that you can continue to enjoy the highest quality of life possible. The question becomes, how will you pay for this care? At this point, I would generally talk about long term care insurance and the reason why this would be the best choice. However, there are two other choices. You could pay for the services from the assets you have saved all of your life, or you could let Medicaid pay the expenses. Let's discuss many of the disadvantages of relying upon Medicaid.
For Medicaid to take care of long term care expenses, here in Tennessee and in many other states, you have to spend on your long term care services, all the assets you have that the agency identifies will keep you from receiving their benefits. The thought of reducing a lifetime of saving to the level required to receive Medicaid benefits is intolerable for many seniors.
Under the benefit of Medicaid, the recipient does not always have the option to live in the facility of their choice. Since Medicaid only pays so much for long term care not every facility is willing to accept patients under Medicaid. Many of the better communities may limit the number of beds available to Medicaid beneficiaries or have none.
While you may believe Medicaid will be there without question, you still must qualify for Medicaid. Not only must there be a need for care, there are financial qualifications. The level of your income may prevent you from receiving Medicaid in many states. Once you qualify for Medicaid benefits though, the income you are receiving will be required to be spent on services, such that Medicaid can pay only the shortfall. Is it desirable to target a retirement where you have to spend all of your income on your own care?
With millions of baby boomers heading for retirement many of will be in need of long term care services as they reach their 70's, 80's, and 90's. The Federal government has already enacted laws trying to encourage the use of long term insurance because they understand the high cost of care and that the government will be unable to pay for everyone's care. It is very likely they will also modify over the years what Medicaid will pay, and make access to benefits more restrictive by continuing to change the entry qualifications. Additionally, the competition for Medicaid beds will be high due to the increased volume of retirees needing care.
Today's retiree is also very mobile. It is not unusual for someone to work a lifetime in one state and retire to another state. Not all states have the same Medicaid benefits and the qualifications vary between states. You may find yourself moving to a more restrictive state making your plans less viable.
What about those family assets that have been passed down to you and you would like to continue the tradition? Depending upon the value of those assets, you could be required by Medicaid to spend them on services rather than retain them and give them to your children.
In the past, mom or dad would give to the children the house and other assets so Medicaid would pay for their long term care. This planning technique has been under target by the government. They started looking back several years and requiring the Medicaid applicant to certify what assets had been given away. The look-back period continues to lengthen and I would not be surprised if it eventually becomes ten years or more.
Medicaid, while a wonderful agency for those who could never take care of themselves, as you can see, only takes away flexibility and in some cases the dignity for those who could afford to take care of themselves. Proper planning and the use of long term care insurance will permit you to avoid the many disadvantages of Medicaid and provide flexibility rather than restrictions.
As you evaluate the cost of long term care insurance you may wonder how you can afford the insurance. If you are unsure how you can afford the insurance, how will you ever afford the cost of care? To have long term care insurance be a small part of your retirement budget, you must plan early and purchase the coverage as soon as you have your retirement on tract. Purchasing coverage in your 50's rather that your 60's may be a significant step in keeping the impact on your retirement budget low. But if you are already in your 60's or older, do not refuse to consider a long term care plan, as there may still be one that will fit your needs and budget.
If you have questions about this or other financial matters, contact my office or another qualified area professional.
HOW TO REACH THE WRITER
Would you like a response to a financial question? Send your question to Doug Horn, 115 W. Broadway, Maryville, TN 37801. Be sure to mark your envelope Money Matters.
Doug Horn, CFP, is an area financial planner with more than 24 years financial experience and founder of Quality Financial Concepts, located in downtown Maryville on Broadway.
Doug Horn, CFP, Registered Investment Advisor in Tennessee and Texas and Registered Principal, Branch Office of and Securities offered through CUE Financial, Member FINRA, SIPC.