Financing Long-Term Care

Although many people realize that nursing home care can be outrageously expensive, fewer people give much thought as to how they would pay for such care if they needed it. These people often believe that such care would be paid by private insurance, Medicare, or Medicaid. Unfortunately, this belief is often unrealistic. Although each of these three sources is sometimes available to pay for nursing home care, there are significant limitations and restrictions to each. Therefore, it is important to know under what circumstances each will -- or will not -- pay. 

1. Private Insurance 

Regular Health Insurance Policies Generally Do Not Help 
Because health care costs for many people are paid primarily through private health insurance, some people believe that the same insurance would cover medically-necessary nursing home care. This, however, is rarely true. Normally, general health insurance policies do not cover the costs of custodial long-term care. 

Long-Term Care Insurance Policies 
This does not mean, however, that private insurance cannot be used to pay for long-term care. Although general health insurance policies do not normally offer such coverage, there are now separate policies that are specifically designed to cover such costs. These policies, commonly called long-term care insurance policies, originated in the early 1980s and have soared in popularity since then. It has been estimated that more than 130 companies now offer long-term care insurance and that almost two million such policies have been sold. 

Buyer Beware: Not All Policies Are Identical 
As with many types of insurance, the long-term care insurance policies are offered by a variety of insurers and provisions can vary widely. In Louisiana, all policies issued after August 31, 1989, are subject to specific state laws regulating their provisions. For example, these laws provide that such policies cannot be canceled because of the insured's age or deteriorating health. Also, in the past many policies provided coverage only if the insured was hospitalized prior to entering the nursing home; this type of limitation is now also prohibited for policies covered by these state laws. Even with these laws, however, policies can still have very different eligibility requirements, coverage, and limitations. Therefore, consumers must take care in deciding whether a long-term care policy would be beneficial to them and, if so, which policy would best suit their needs. 

If You Are Dissatisfied With Your Policy 
In Louisiana, consumers also have a right to return long-term care insurance policies. Under normal circumstances, a consumer is allowed to return a policy within 10 days of its delivery and have the premium refunded if he is dissatisfied for any reason. If the policy was purchased as a result of direct solicitation by the insurer, this time period is extended to 30 days. 

II. Medicare 

Because many people cannot afford long-term care insurance or no longer meet the minimum eligibility requirements for coverage, they often hope that Medicare will bear the costs of their nursing home care. Medicare, unfortunately, is not designed to be a permanent solution to the financial dilemma faced by those requiring long-term care. Although the program does afford some coverage to recipients requiring nursing home care, the coverage is available only under the following conditions: 

1 . The patient must be admitted to a skilled nursing facility after a 3 day hospital stay; normally, this admission must occur within 30 days of the hospital discharge. 
2. The patient must receive daily skilled care related to a condition for which he was hospitalized or for which he was treated while hospitalized. 
3. The patient must need and receive skilled nursing 7 days per week, skilled rehabilitation at least 5 days per week, or a combination of both totaling 7 days per week. 

In addition to these restrictions, the coverage is also limited in the following respects: 

1 . Coverage extends only to 100 days per spell of illness. 
2. The patient is responsible for the co-payments after the 20th day. The co-payment amount for 1997 is $95.00 per day. 

What To Do If You Think Medicare Should Pay For Your Care 
When a resident enters a nursing home, the nursing home tries to determine whether the stay will be covered by Medicare. If the nursing home determines that Medicare will not pay the bill, then it must give the resident notice of this determination. If the resident disagrees with the determination, he can ask Medicare to pay the bill. If the resident does ask Medicare to pay, the nursing home is not allowed to bill him until Medicare decides whether his stay will be covered (although he will be responsible for the bill if Medicare ultimately denies coverage). 

Ill. Medicaid 

While private insurance and Medicare are not always a solution to the problems associated with the costs of long-term care, Medicaid can under some circumstances offer the needed assistance. Medicaid is a joint federal-state program that is designed to offer medical care to individuals and families of limited means. In Louisiana, Medicaid benefits are available to pay for necessary nursing home care for eligible individuals. 

How To Know If An Individual Is Eligible For Medicaid 
Medicaid is not available to everyone. To be eligible for Medicaid for nursing home care, an applicant must meet both an income and a resource test. 

The income test. For an individual applicant to be eligible for Medicaid coverage for nursing home care, his monthly gross income in his name must not exceed 300% of the monthly SSI benefit rate. In 1997, this means that the applicant's monthly income cannot exceed $1,452. 

The resource test. In addition to meeting the income test, an individual applicant must not have countable resources (or assets) that exceed $2,000. Although most types of resources that can be sold or converted to cash are counted, there are a few exceptions. For example, subject to certain limitations and requirements, the following types of property are not normally considered countable resources: 

• A home in Louisiana 

• Household goods (such as furnishings) 

• Personal effects (such as clothing or jewelry) 

• One vehicle if used for medical appointments or essential daily activities or if its current market value does not exceed $4,500 

• Some types of life insurance policies 

• Burial spaces and up to $1,500 set aside expressly and solely for burial expenses 

• Up to $6,000 of income-producing property that produces income at an annual net rate of return of at least 6% 

Special Eligibility Rules for Married Individuals 
The income and resource limits discussed above are those for an individual applying for benefits. Applicants should be aware that other rules may apply if the applicant is married and the spouse is either residing in the same nursing home or is remaining at home. 

Couples residing in the same facility. If both members of a married couple reside in the same facility, then for eligibility determination purposes they may be treated either as individuals or as a couple (depending on which is more advantageous to them). If they are treated as a couple, then they would both be eligible for benefits if their combined gross income does not exceed $2,904 per month (1997 amount) and their combined countable resources do not exceed $3,000. 

Spouse remains at home ("Spousal Impoverishment"). If a married Medicaid recipient entered the nursing home after September 29, 1989, and his spouse remains at home, he may elect to take advantage of the "spousal impoverishment" protections now afforded under Medicaid. Under spousal impoverishment, the spouse who remains at home may be allowed to retain some or all of the institutionalized spouse's income and resources for maintenance needs. 

Income. The spouse who remains at home is allowed to keep all of her own income. If her income is less than $1,975.50 per month (1 997 amount) then she is also allowed to keep that portion of her spouse's income necessary to increase her monthly income to $1,975.50. 

Resources. The spousal impoverishment protections also extend to resources. The law allows the spouse remaining at home to retain up to $79,020 (1997 amount) of the couple's countable resources (including the couple's community property and the separate property of each spouse). If, however, the spouse remaining at home has separate resources worth more than $79,020, then her separate resources above this amount (as well as the couple's community property and the institutionalized spouse's separate property) are considered available to the institutionalized spouse and will be counted in determining his eligibility. 

If spousal impoverishment is elected and resources allocated to the spouse remaining at home are in the name of the institutionalized spouse, then the institutionalized spouse must transfer the resources to his spouse within one year from the date he becomes eligible for Medicaid. 

Patient Liability 
If an applicant qualifies for Medicaid, it is important to remember that this does not mean that his nursing home care is free. The applicant may still have to pay a part of his income to the nursing home; this contribution to the cost of his care is called his "patient liability." Medicaid pays the nursing home only the difference between the applicant's monthly patient liability and the allowable Medicaid rate. 

Basically, a Medicaid beneficiary is allowed to deduct from his gross income only $38 per month for personal needs, whatever is necessary to pay Medicare and other health insurance premiums, and the amounts that Medicaid allows him to reallocate to his spouse and dependents (see the section above on Spousal Impoverishment). The remainder of the gross income must be paid to the nursing home as his patient liability. 

What Happens If You Transfer Your Resources In An Attempt to Become Eligible for Medicaid
Applicants must also be aware that when the resource test is applied, all transfers of resources made within the 36 months-5 preceding the application for Medicaid benefits are also considered. If an applicant has transferred a resource for less than fair market value during that time, then Medicaid may impose a transfer penalty against the applicant and refuse to pay for nursing home care6 until the penalty period expires. The penalty period begins to run from the month of the transfer, and its duration is determined by dividing the total uncompensated value of the property transferred by $2,000 and rounding down. The following examples show how the penalty could be assessed: 

Medicaid applicants should also be aware that recent changes in the law now make such transfers criminal Effective January 1, 1997, federal law provides for criminal fines and imprisonment if property is transferred and a transfer penalty results. 

If a Medicaid applicant would be subject to a transfer penalty, the penalty can be eliminated if all the transferred assets are returned to the applicant.

Medicaid Claims Against Your Estate After You Die 
Under a federal law passed in 1993, states are now required to institute programs to recoup Medicaid benefits from a recipient's estate once the recipient dies. Louisiana has passed legislation to establish such a program, although the program is not yet operational. Medicaid recipients and their heirs, however, should be aware that there is a real danger that the State will have a claim against the estate for benefits received.