Studies have confirmed that people say they fear public speaking more than death. I understand the instant humiliation of public speaking. But I secretly believe that these studies are more about the belief that we are not going to die, or have a stroke, break a hip, or suffer from dementia.
As a result, many people have failed to make plans for disability and the nursing home care that may be in their future. Research shows that that at least 70 percent of people over 65 will need long term care services at some point in their lifetime. Only about 10 percent of seniors have long term care insurance.
And nursing home care is expensive! The private room rate in a nursing home averages $79,935 annually. The cost of a semi-private room averages $72,270 annually.
You may be inclined to put this article down and pull the covers over your head at this point. But as a lawyer specializing in Elder Law, I have some advice for seniors and their families who want to avoid the devastating financial effects of nursing home care.
First, you need an understanding of who does and doesn’t pay for nursing home care. Although there is a popular misconception that Medicare pays all medical costs for people 65 and older, Medicare pays very little toward nursing home care. If you are hospitalized for three days (an actual admission and not hospitalization “for observation”) Medicare will pay 100% of the costs of skilled nursing care for the first 20 days. For days 21-100, Medicare sill pay 100% over $144.50 per day. For days 101 an beyond, Medicare pays nothing!
Accordingly, people who enter a nursing home usually pay for it in one of three ways; (1) with their own resources, (2) with long term care insurance, or (3) with government assistance–Medicaid, called “TennCare” here in Tennessee. TennCare is “means tested,” however, which means in theory that you won’t qualify unless you have income under $2,130 per month and assets limited to $2,000 in value.
Second, you need to be aware that “giving everything to the kids” is not a good plan. If you need TennCare within 60 months after making a transfer without receiving fair market value in return, you will be penalized for that transfer. The penalty period won’t begin until you really need TennCare (when you have virtually no resources and need nursing home care).
Giving everything to the kids can also be risky in other ways. What if a child takes bankruptcy or gets into a bitter divorce battle? There can also be negative tax consequences caused by giving your assets to your children.
Finally the good news. There are ways that you can plan ahead to qualify for TennCare, if you need it, without spending everything down to $2,000. There are exempt transfers and exempt assets, including in most cases a home.
Especially important, there is protection for a spouse when a husband or wife enters a nursing home. In 1988, as part of the Medicare Catastrophic Coverage Act, Congress enacted a law that has become known as the Spousal Anti-Impoverishment Law. This act is complicated, but as interpreted in Tennessee, will allow the spouse at home to save half the nonexempt assets up to $115,900.
Planning is key and I’ve only touched the surface here. My advice is to consider talking to an attorney specializing in this area if you have concerns.