Why You Should be Concerned About Medicaid

Medicaid is the government paid medical assistance for the low income elderly, right? Yes, it is. But your client has a sizeable nestegg. So, your question should be how much money is enough? What is the threshhold amount below which Medicaid planning is advisable?

The answer is, "It depends", but let's look at some of het factors, or variables, that influence the answer. First, the fact is we are living longer, or as I have heard it put, "We aren't dying the way we are supposed to anymore." Thirty years ago the average life expectancy was somewhere in the late 60's, early 70's. Twenty years ago the average life expectancy was around the mid to late 70's, ten years ago the late 70's to early 80's. Today, living into your 90's is fairly common. I have heard numerous reports that opine that children born within the last 5 years have a better than equal chance of living well past 120. No, that is not a typo, 120.

Second, since we are living longer, the chances of developing some type of mental disability, such as Alzheimer Disease or Dymentia are on the rise.

Third, the rise in mental disability increases the average length in nursing homes because while the mind no longer works properly, the body continues to run just fine.

Additionally medical and nursing home costs are increasing every year. I won't go into exact costs in this area as it varies so wildly from individual to individual, but, you don't have to be old and reside in a nursing home to feel the bite of medical expenses. In the Chicago area the average monthly nursing home cost if between $6 - 7,000.00 per month, which equates to between $72 - 84,000.00 per year. This number does not include incidentals like hospital deductibles, drug deductibles, physical therapy, etc.

Even though we are retiring later, the average retirement age remains somewhere between 65 - 72. Retirement you no longer produce new income and are now living off your savings, pension and social security.

Now that we know some of the facts, let's apply these factors to some real life situations. Let's say Mr. and Mrs. Smith have $500,000 of assets, both are 70 and are just recently retired. They live in a house that is paid-off and are getting an unheard of rate of 5% on their investments. Between social security, a pension and interest income, they live comfortably on $30,000 per year gross without eating into any of their savings.

Ten years down the road, it is necessary for Mr. Smith to enter a nursing home because he has developed Alzheimer disease. The average cost per month has probably risen to over $7,000 per month. Mr. Smith enters the nursing home and begins self-paying for care and continues like this for the first three years. Three years at $7,000 per month equals $252,000, which does not include anything but the basic nursing home costs.

That leaves Mrs. Smith with approximately $300,000 to live on. Mrs. Smith lives fairly comfortably on social security, pension and interest income until at age 90 she enters a nursing home with dementia. By that time nursing home costs have increased to $7,500 per month and $90,000 per year, which still does not include other expenses she has to incur.

Mrs. Smithh lives for 5 years in the nursing home. Unless family helps with the bills, Mrs Smith will be forced into the Medicaid arena to help pay a portion of her continuing care. Additionally, Mr. and Mrs. Smith were unable to leave anyting for their kids. Now, the government will tell you that savings are for retirement and not to make the next generations wealthy, but I think if you talked to Mr and Mrs Smith, they would disagree to some extent. The fact is that most parents want to be able to leave something to their children, grandchildren and/or charity.

There are many strategies for protecting asssets and qualifying for medicaid and the most effective strategies involve pre-planning and maintenance. The worst outcomes stem from waiting too long and going through what is called "crisis" planning. A crisis plan is one where mom and dad are being forced to spend down their assets to become eligible for Medicaid. They find themselves having to attempt to effect changes in their portfolio now, without the benefit of pre-planning strategies.

Don't let this happen to you or ones you love. Schedule an appointment to meet with me and let me tell you what can be done to get you eligible for Medicaid and save some of your assets to give to your loved ones without incurring any fines, penalties or pay-backs.