People sometimes get bits and pieces of information, and they go forward with assumptions that are not accurate. This certainly enters the equation when it comes to nursing home costs and the way that they are typically addressed.
One misconception is the idea that Medicare will pay for long-term care if you ever need it. In fact, this government health insurance program for seniors does not pay for long-term care, even though this seems counterintuitive to most logical thinkers.
It is not easy to get out your checkbook to pay for long-term care out-of-pocket. A year in a nursing home could easily cost you over $100,000, and people often require multiple years of care. In fact, 10 percent of nursing home residents remain in the facilities for at least five years.
Medi-Cal is a government program that does pay for nursing home care. There are certain rules that govern the program, because it is only available to people with very limited financial resources.
This is where the idea that a nursing home would get half of your assets stems from. The Medi-Cal limit on countable assets is $2000 for an individual. However, your spouse could keep half of the assets that are countable, and you could still qualify for Medi-Cal to pay for your nursing home care.
The portion that the healthy spouse could keep is called the Community Spouse Resource Allowance. We should point out the fact that there is a limit that stands at $119,220 in California in 2015.
The nursing home would not necessarily get the other half of the countable assets. You could give gifts to your loved ones before you apply for Medi-Cal coverage, and you would be keeping the assets in the family.
This strategy is called a spend down, and it is often implemented, but you have to act in advance if you want to obtain Medi-Cal eligibility at the ideal time. There is a 30 month look-back period in the state of California. You have to complete your gift giving at least 30 months before you submit your application for Medi-Cal coverage. If you violate this rule, your eligibility would be delayed, and you would have to pay for your long-term care out-of-pocket during the penalty period.
We should point out the fact that you can give direct gifts when you are spending down, but there is another option. You could convey resources into an irrevocable Medi-Cal trust.
If you need the money, you could continue to receive the earnings from the trust before you apply for Medi-Cal, but the principal would not be available to you, and it would not count if you were to apply for Medi-Cal coverage. After your passing, the beneficiaries would assume ownership of assets that remain in the trust.
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