Medicaid Gets Tough
Prepare to pay for your own long-term care.
By Mary Beth Franklin, Senior Editor
From Kiplinger's Personal Finance magazine, May 2006
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Another effect of the new medicaid restrictions will be to encourage people to buy long-term-care insurance while they are young and healthy. That leaves out those who are already too old or sick to qualify and those who cannot afford the premiums, says Bonnie Burns, a consumer-health advocate in California. But many of them may be poor enough to qualify for medicaid immediately or soon after they exhaust their assets, as long as they don't violate the asset-transfer rules. Currently, only six million Americans have private long-term-care insurance. In most states, less than 10% of the 50-and-older population has coverage.
Having long-term-care insurance has always been preferable to relying on medicaid because it gives you more options in choosing a nursing home. The new law offers other incentives for buying such insurance. It authorizes states to offer long-term-care partnership programs that promise consumers asset protection in exchange for purchasing insurance (see the box below). "This is the biggest catalyst for long-term-care insurance in years," says Phyllis Shelton, president of LTC Consultants, a training firm for long-term-care insurance agents in Hendersonville, Tenn. "People won't buy insurance to pay for long-term care if they think it's free under medicaid. Now they'll know it's not."
If you can't afford to pay and medicaid won't, then who will? Rest assured that if you're poor enough from the outset or you exhaust your savings on nursing-home bills, you'll still qualify for government-subsidized care. Only if you run afoul of the new asset-transfer rules -- by giving away money or property within five years of applying for help -- would there be a waiting period after you apply for assistance.
Critics have nicknamed the new law the "nursing-home bankruptcy act," claiming institutions might be stuck providing unpaid care. This might tempt nursing homes to dump indigent residents on hospitals, using a minor illness as an excuse to free up a bed for a paying customer.
Some opponents of the law have even raised the specter of "filial responsibility," saying it's possible that states might dust off old laws holding adult children liable for the debts of their destitute parents. Although 30 states have such laws, it's highly unlikely that any would try to enforce them.
Bottom line: The poor will be protected, but families who have money will have to spend more of it if a loved one needs nursing-home care.
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