According to an article published in the Wall Street Journal on May 14, 2012, if you are married and you and your spouse both reach the age of 65, there is a 70% probability that one of you is going to need long-term care.  As if that is not troubling enough, a great many of us are completely unprepared to pay the cost of long-term care.  Skilled nursing in Hawaii can easily top $8,000 per month.  How do people handle that?

For those of us who are not incredibly wealthy, one approach is long-term care insurance.  This is a specialized area, and you should talk with an insurance agent who focuses his or her practice on long-term care insurance before you plunk any money down.  A couple of important details are whether you are insurable (the older we get, the odds of that decrease), and whether you can afford the premiums (which tend to be higher if you are buying your policy later in life).  The bottom line is that the sooner you look into long-term care insurance and get your policy in place, the more likely it will be that you can find a policy you can afford.

An alternative to insurance is Medicaid.  It goes by different names in different states (Hawaii’s version is called MedQUEST), but it is run jointly by our federal and state governments.  The federal government sets the overarching rules and provides funding.  The states, which implement the program, are allowed to adopt their own rules for qualification and enforcement.  Think of it as government insurance for nursing home care for those with limited financial resources.

Medicaid is “means-based.”  This means that having "too much" income or "too much" in assets will disqualify a Medicaid applicant.  In addition, having “assets” is not the same as having the money to pay for care.  Those undeveloped lots in Nevada that seemed like such a good deal at the time could push you over the asset limit for Medicaid, and they may be impossible to sell.

For those with assets exceeding the Medicaid limits, giving assets away may disqualify them from Medicaid assistance if the transfers violate the “look back” period designed to keep people from gaming the system.  Of course, an elderly individual might have had innocent intentions when he or she made a disqualifying gift before the need for long-term care was foreseen.  Regardless, any gift (including a gift to charity) is a red flag when it comes to Medicaid qualification.

Each state takes a different approach, and it is easy to run afoul of the rules and be disqualified from benefits.  The good news is that having an awareness of the rules that are specific to your state can help you plan for a worst-case scenario where you or a loved one might need assistance with long-term care costs.

A critical realization is that Medicaid may limit your options in terms of care facilities or quality of care.  So we should not all assume that Medicaid is the best option for us or our family.

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