Long Term Care Social Contract?

In 1993 President Clinton signed the Omnibus Budget Reconciliation Act (OBRA ’93.) The law basically states that if you need more long-term care than you can afford, Medicaid will step in and pay. An individual can be quite wealthy and hold substantial assets and still qualify. The downside is that if you take the deal the only care that you will receive is whatever Medicaid covers, which is primarily nursing home care. Your estate must also pay back every penny Medicaid spent on your behalf.

Most people are under the impression that you must be poor to receive Medicaid benefits. The reality is that an individual can have nearly unlimited income and still qualify for Medicaid benefits. Before assessing eligibility, Medicaid deducts private health and long-term care costs from the applicants’ income. If your expenses are high enough it is likely you will qualify for Medicaid. Basically, if your income is less than $7700 a month (the average cost of a semi-private nursing home room) you qualify.

When it comes to assets, many valuables are exempt when determining Medicaid eligibility, such as $603,000 in home equity in most states, a car, pre-paid burial, a business (including capital and cash flow) term life insurance, personal belongings, and IRAs in payout mode. Get a Medicaid lawyer involved, and trusts, annuities, and qualified transfers will be employed to make sure the well-to-do Medicaid applicant qualifies.

The question that should be asked is why so many people fail to plan for long-term care by neglecting to save or buy long-term care insurance? Why would any reasonable and prudent person rely on Medicaid and end up in a nursing home, vulnerable to deadly viruses? Why would anyone want to end up in a Medicaid nursing home receiving care of dubious quality, only to have to pay it all back from their estate? The answer of course is to buy long-term care insurance while healthy and avoid Medicaid nursing homes all together, leaving your estate intact for your loved ones.