A professor of economics at the New School for Social Research estimated that 75 percent of Americans who were nearing retirement in 2010 had less than $30,000 in their retirement accounts. The percentages have not gotten any better since 2010.
At the same time, a majority of people over 65 will need some time of long term services and 40 percent of people will need care in a nursing home, according to the Centers for Medicare and Medicaid Services.
The costs of nursing home care can be staggering. According to the 2012 MetLife Market Survey of Nursing Home . . ., the average cost for a semi-private room in Tennessee is $66,065 per year, and for a private room $73,365. According to the Genworth company, the average length of stay in a nursing home is 2.8 years.
There are four potential sources for payment of nursing home costs. One, of course, is private wealth. As you can see from the numbers I’ve quoted, however, private wealth is not going to be enough for most people.
The second source of payment is long term care insurance. Unfortunately, only about 10 percent of seniors have such coverage.
Medicare pays something, but not much. If a senior is hospitalized for 3 days (3 midnights, really), Medicare will cover up to 100 days of skilled nursing care to maintain or slow deterioration of the patient’s condition The first 20 days are covered at 100 percent. For days 21 to 100, the patient must pay a co-pay of $148 a day.
Once Medicare days are exhausted, many people attempt to qualify for Medicaid (called TennCare here in Tennessee). These days, the first hurdle to Medicaid eligibility in Tennessee is medical–meeting the nursing facility level of care guidelines published by the Bureau of TennCare. Either a nursing home or the local Area Agency on Aging and Disability will complete a Pre-Admission Evaluation (“PAE”). In order to qualify for nursing home care, a person must score a 9 or above on a scale that measures a senior’s ability to perform the activities of daily living.
Even if the person qualifies medically, Medicaid is “means tested.” That means that a senior cannot get help with the costs of nursing home care unless his or her income falls below a certain threshold ($2,130 a month currently) and he or she has assets with a value less than $2,000.
The good news is that a spouse of a senior who needs nursing home care will not necessarily be utterly impoverished in this process. In 1988, as part of the Medicare Catastrophic Coverage Act, Congress enacted a law that has become known as the Spousal Anti-Impoverishment Law. The law can be used to allocate income and resources between the “Institutionalized Spouse” and the “Community Spouse.”
For those applying for Medicaid, there are exempt assets and it is sometimes possible to transfer assets. Transfers must be used carefully, however, because Medicaid has a 60-month “look back” period. Giving away assets in the 5 years before applying for Medicaid can cause a senior to be penalized.
