As we all inch closer and closer to the benchmark of age 65 and start thinking of things like Medicare, Medicare Supplements, Medicare Advantage Plans, Medicaid and a few “medi’s” that I’m probably omitting. It’s no wonder that we are confused! Whoever was in charge of naming all of this stuff surely did a great job… (If their job was to confuse us beyond hope of understanding what these programs are or how they will help.)
It’s especially confusing when time is not on your side. For example, if you have a spouse or parent that is declining rapidly and it looks as if a nursing home decision is imminent you don’t have the time to read thousands of pages of government material. At times like these, we wonder whether the Federal Paperwork Reduction Act actually reduced the amount of paper or did just the opposite!
I’m going to cover these issue from the 30,000 foot level. In future posts, we will drill down into the particulars of some of the different programs offered. It’s important that you know which door is appropriate to knock at for needed assistance. When trying to sort through all of this, it’s important to know whether any assistance is available. Which of the above medi’s will pay, what will they pay for and when will they pay?
Medicare is the huge federal health insurance program which primarily benefits seniors over the age of 65. Medical bills are paid from trust funds which those covered have paid into. Medicare is a federal program. Ergo it is basically the same everywhere in the United States and is run by the Centers for Medicare & Medicaid Services.
In our office, we are primarily concerned with how to help Seniors pay the cost of long term care. As an example, let’s say that Mom fell and broke a hip. After a several day hospital stay, she may be discharged to a rehab facility in a local nursing home to receive therapy necessary to get her back up and walking again. In such instances, Medicare may pay up to 100 days.
Notice the underlined words. In this case, it’s Medicare (as opposed to Medicaid) that is paying. And they will pay up to 100 days. This doesn’t mean that they will pay for 100 days, just up to that amount. Usually the way this is interpreted by most nursing homes is that if Mom is progressing and cooperating with therapy, Medicare will continue to pay up to 100 days. After 100 days Medicare quits paying and you’re on your own. At this point, if Mom has to stay in the Nursing Home, she just writes a check every month. Hopefully , however, she becomes qualified for Medicaid assistance. If and when she becomes Medicaid eligible, Medicaid will pay the shortfall amount. The shortfall amount is (roughly) the difference between her social security income and the cost of care.
Medicare Supplement Insurance
To cover the co-pays and deductibles that Medicare won’t pay, many people have Medicaid supplement insurance.
In the above example when Mom broke her hip and went to the nursing home for rehab therapy, Medicare will pay 100% of days 1-20. After this, Medicare pays 80%. The other 20% comes out of your pocket, unless you have Medicare supplemental insurance. The catch with a Medicare supplement policy is that when Medicare stops paying, this policy also stops paying. Then you’re back to private pay.
4 Parts of Medicare
Medicare is divided into four distinct parts, with each providing different coverage types and packages.
Medicare Part A
Includes coverage for inpatient hospital and rehab in a nursing facilities. Some in-home health care as well as some hospice care is included as well. Most people don’t pay a Part A premium since they have paid into the system for over 40 quarters
Medicare Part B
Pays for physician services, outpatient hospital services, ambulance, certain home health services, durable medical equipment, some therapy services in a SNF for functional declines and other items.
Medicare Part C
Also referred to as a Medicare Advantage plan. Part C is an alternative insurance plan offered by private insurers. Traditional Medicare and prescription drug coverage are provided under a single policy.
Medicare Part D
Prescription drug coverage for those who have original Medicare. This plan is available for purchase through private companies.
We’ve have taken a 30,000 ft overview of the Medicare system. Now, let’s fly over and take an overview of Medicaid.
Medicaid is a huge program and covers different needs. However the needs that we are the most concerned about in our practice is payment for long term care expenses of a declining senior. To give an overview of what Medicare and Medicaid would pay in a typical situation, let’s go back to the story of our fictional heroes – Frank & Martha.
It Started with a Fall
You may remember that the journey for Martha started with a fall. As Martha & Frank were headed out of their house one Sunday morning on the way to church, Martha fell down their front steps and broke a hip. After a several day hospital stay, Martha’s doctor recommended that Martha check into the rehab wing of a local skilled nursing facility where she would receive therapy for the next several weeks. The goal of this rehabilitative therapy was to get Martha up and walking again.
This stay for rehab is paid by Medicare. Medicare paid 100% of the first 20 days of Martha’s stay at the rehab facility. After day 20, Medicare paid only 80% of the care and Martha was responsible for the remaining 20% of her cost of care. Fortunately however, Martha had a good Medicare Supplement policy that paid this Medicare co-pay portion (the 20%), so Martha’s rehab stay in her local nursing home was completely paid by Medicare.
It’s important to have a good Medicare supplement policy to pay this 20%, because even 20% of the cost of rehab is expensive! The main thing you need to know about Medicare supplement policies is that when Medicare quits paying – the Medicare supplement policy also also quits paying. So in Martha’s case, after 100 days, both Medicare and her Medicare supplement policy quit paying for her care.
What Happens After Day 100?
But Martha’s hip was not her only problem. Martha also had dementia and it was getting worse. As a matter of fact, it seemed that the anesthesia that Martha had received and the several day hospital stay had kicked her dementia into high gear.
Frank had been caring for Martha at home, but Frank had health care issues of his own. Martha’s doctor stated that Martha now needed 24 X 7 skilled care that could only be provided in a long term care facility. Frank would no longer be able to care for his wife at home.
But since, it’s now past the 100 day period that Medicare will pay, the question is who will now pay for Martha’s long term care expenses? The cost of this care is now paid by Frank & Martha. Long Term care is expensive. In the facility that Martha is in, her monthly cost of care is in excess of $7,000 per month. Frank and Martha have worked hard and have saved some money – but at this rate Frank figures that he would be destitute in less than 2 years.
After this point, Frank would have no money left to pay for his own care needs or monthly living expenses. If he spent all of his money on Martha’s care, he would be reliant on his social security check – everything else would be gone!
Unfortunately, we see this happen way too often! One spouse goes into a nursing home and the other spouse spends down all of their hard earned savings for the sick spouse’s care. It doesn’t have to be this way.
There are options to protect assets for Frank’s benefit AND help Martha have her care paid while continuing to get the skilled nursing care that she needs. This way this is usually accomplished is to help Martha qualify for Medicaid benefits to pay for her cost of care. Medicaid is the primary payor of long term care expenses for most folks in America.
Martha suffered a traumatic and unplanned life event that could have been devastating financially. Fortunately, Frank took immediate action and started the planning process. As a result of having a Medicaid Asset Protection Plan in place, Frank will be able to keep a substantial amount of his assets and Martha will get the care that she needs.
If you have a Loved One in a nursing home now or is going to one soon, give us a call so planning can be put into place to protect assets before it’s all gone.
Best wishes to you and your family as you work to do the necessary planning for your family.
At ELP, we work to protect you!
We work with people to do various types of estate planning. There is no one size fits all plan and no plan is categorically better than others. The key is to meet with your attorney (hopefully us!) to discuss your unique situation and have a plan crafted that is best for you. If you or your declining parent is not 100% sure of their beneficiary designations, please be proactive and give us a call before you (or they) lose capacity.
Without a properly flexible plan, how will you care for your declining Loved One, be there for your family, get work done, and pivot in the event of a crisis? What about cost? How will you pay for it all? If you make the Assisted Living Facility choice, how long will the money last? Together, we can craft a proactive plan! Lets get started protecting your assets!
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We have covered some legal topics in this edition and as always, I want to emphasize that (1) the law is different in every state, so if you live in a state other than Arkansas, just know that the law may be totally different in your state; (2) your situation is unique, so one size doesn’t fit all – meaning what we discuss herein may not be right for you; (3) we have purposely over-simplified many of the topics above (otherwise this would be many pages long and unreadable because of all of the legalize). It is imperative that you meet with your attorney (hopefully us!) and get a plan that will work for you. Please don’t attempt DIY Estate Planning based on what you read in this (or any) article AND don’t try to go it alone. Please consider this, get your questions answered and take action.