Whether a nursing home is needed now, next month or next decade – to minimize the financial strain of nursing home costs, planning is very important.
Long-term care is expensive. According to the U.S. Department of Health and Human Services, the average nursing home cost is approximately $75,000 per year for a semi-private room, or $91,000 per year for a private room. The average person who enters a nursing home receives care for approximately three years. Other types of care, such as assisted living or home health aides, are less expensive, but still a significant cost.
How to Pay for Long-Term Care
Different families will take different approaches to planning for long-term care. About 23 percent of all long-term care expenses are paid for as out-of-pocket expenses, and some families are able to completely fund long-term care from their own resources. A small number of families purchase long-term care insurance, and about 3 percent of nursing care expenses nationwide are paid by such policies. Medicare has a limited role in paying some costs, but in general Medicare does not pay for long-term stays in nursing homes. That leaves Medicaid.
Medicaid is a crucial part of America’s health care safety net, and the program ends up covering nearly half of all nursing home costs nationwide. Medicaid has income and asset limits for eligibility, and it is the default provider for low-income families. However, with proper planning, the program can also be a safety net to help people with assets avoid having those assets depleted on the potentially devastating costs of long term care.
Many people, faced with the prospect of spending down their life savings before becoming eligible for Medicaid, naturally want to preserve some assets for a spouse or the next generation. With proper planning, this can be done. However, waiting until you need long-term care will lead to problems. The Medicaid “look-back” period prevents people from simply transferring all their assets to their children and then declaring themselves to be under the asset limits. When you apply for Medicaid, any transfers of assets or gifts made within the previous five years are subject to a penalty. So while planning options to preserve assets are available even after admission into a nursing home, advance planning usually allows more assets to be protected for the family.
You should not rely on the advice of non-experts regarding Medicaid spend down rules or long-term care planning in general. This is one area where there is no substitute for the advice of an experienced elder law attorney, who can guide you through the process and ensure that both your health and your assets are protected.