MEDICAID REFORM: Family Assets at Risk...

Four years ago, "Betty" gifted her $100,000 house to her only child, "Ben".  The main reason was that, due to gradually failing health, she was shifting her assets around in possible preparation to enter a nursing home sometime down the road.  She got the idea from a friend who had done the same thing several years earlier.  After all... why not pass this money on to Ben instead of letting a nursing home take it all?

News Flash!  On February 8, 2006, President Bush signed the "Deficit Reduction Act" into law.  Unbeknownst to most Americans are the provisions in the act aimed directly at Medicaid Reform... mainly as it applies to LTC.  The key part of the reform will focus on what has come to be known as the "Look-back Period". 

For years, the look-back has been 3 years... with minimal scrutiny.  BUT... the new look-back has changed to 5 YEARS... and promises use of a more powerful magnifying glass.  However, only time will tell how effectively the new standards work, or whether cost-effective legal strategies are developed to circumvent the new laws.

The  main intent of the reform is simply to STOP the long-time trend of relatively wealthy individuals getting their nursing home expenses paid by the taxpayers.... while their families escape paying thousands (even hundreds of thousands) of dollars in nursing home costs.  LTC is the largest drain on the Medicaid system; and until now, there was no end in sight to this escalating liability.

In the example above, the 5-year look-back by Medicaid would "capture" the house transaction that took place 4 years earlier.  If Betty were to enter a nursing home that costs $5000 a month (the low end of the current national average), her son Ben would then be responsible for paying for Betty's first 20 months in the nursing home!  The look-back would also apply to other assets Betty might have given Ben.

Traditional LTC Insurance

"Traditional" LTC insurance (LTCi) has not changed too dramatically over the past several years.  The biggest deterrent for most has been the annual cost of premiums... especially if they wait until they are in their 60's to start looking for coverage.  However, under the new Medicaid reform and 5-year lookback, individuals may have to take a more serious look at their need to have some type of LTCi... mainly for ASSET PROTECTION for their family.    

The biggest decision regarding Traditional LTCi is when to buy in???  Similar to life insurance, LTCi also gets more expensive per year, the higher the age you attain.  Another issue to be aware of is that you may be diagnosed with certain medical conditions which may knock you out of "Preferred" status... raising the cost of your annual premiums... or possibly eliminate your insurabilty completely!  

A common benchmark for obtaining a Traditional LTCi policy is age 50 +/-.  But again, each year you delay will raise the cost of your premiums and increase your chances of developing medical conditions.  Post-reform predictions have clients buying in at earlier ages.

It should also be noted that MARRIED policy owners will pay a lower premium than singles with identical circumstances.  The assumption here is that the "well spouse" will care for the deteriorating spouse... at home... for as long as possible.  There will probably also be a longer period of less expensive "assisted living" or "home nursing" before full-blown nursing home options are used.

NEW LTC Alternatives tied to LIFE INSURANCE   

Recent innovations in the Life Insurance industry have allowed for the offering of an exciting new LTC product that is tied to LIFE INSURANCE.  The product that we see the most takes the "Face Value" of the life insurance and makes it available to pay Nursing home expenses during the insured's lifetime.  There is also an available "rider" which allows the face value amount to be DOUBLED to pay expenses if the nursing home event occurs.

The intriguing feature of this LTC / Life Insurance option versus Traditional LTCi occurs if the insured never needs to use the policy for nursing home coverage.  Upon the Insured's death, their BENEFICIARIES receive the face amount of the policy!  If only part of the original (pre rider) face amount is used for nursing expense, then the remainder goes to the beneficiaries.

Contact LIFE-HEALTH WEALTH ASSOCIATES today to see which LTCi Option is Best for your situation! 

Contact us today!

LIFE-HEALTH-WEALTH ASSOCIATES

Office: (513) 829-3749; Cell: (513) 260-7115; Email: m.ward@fuse.net