I’d like to share some Elder Law News of which I think you should be aware. There is Bill in Congress that has been proposed to stop the federal mandate, which requires states to have an estate recovery program. I am going to explain how estate recovery impacts people and why you should care about it.
We live in a world where a lot of people are going to need long term care. We have a large population of baby boomers who may live well into their 80’s. Many of them will likely have health issues requiring long term care. Those seniors whose care needs are not too significant, may consider the option of going to a personal care home or an independent living facility.
Long Term Care Costs
However, you need care in a skilled nursing facility costing $150,000 a year, not many people can afford that. This is why many people look for government help, which for most folks means Medicare or Medicaid. Unfortunately, we all pay into the system for many years, with the idea that when we reach 65 years of age, we will have a magical retirement with health coverage. Medicare does not pay for long term care, which is the single biggest expense that seniors face. Instead, Medicare’s primary focus is acute care.
This means that if you had to get cancer, Medicare will pay the medical expenses associated with cancer treatment, including hospitalization, medication, chemotherapy, radiation and surgery. The treatment may vary depending on the type of cancer, but treatment is considered to be acute care. You may have some co payments with Medicare, but it depends on what options you select when you enrol in Medicare. Although the disease is terrible, when you receive treatment for cancer, from a financial standpoint it does not take away all of your money.
Medicare Only Pays for Acute Care
Let’s contrast that with a disease that requires custodial long term care, such as dementia, Parkinson’s or a stroke. These diseases reduce your cognition and take away your ability to understand what’s going on. The type of care required for dementia is custodial long term care. This means you will be paying as much as $150,000 a year. Only when you go broke, can you apply for Medicaid, which will start paying the nursing home.
To be eligible for Medicaid, as a single person, you are allowed to keep a car, and you can prepay for a funeral plan because the state won’t pay to bury you. You can also have a few thousand dollars in the bank and are allowed to own a home. This is because they supposedly don’t count the house from a Medicaid eligibility standpoint.
Medicaid and The Estate Recovery Program
Medicaid is largely federally funded and administered by the state, but each state administers Medicaid differently. They are also required to have the estate recovery program. If someone has been eligible for Medicaid and has received long term care, anything in their estate must be sold by the executor of the Will, when they pass away. This is because the State of Pennsylvania needs to be reimbursed for all the money spent on the person’s care.
We have often had adult children who are the power of attorney, asking us what they should do with dad’s house. When dad went to the nursing home, he was allowed to keep his house. This was some consolation after losing his retirement and savings account money, to pay for care to be eligible for Medicaid. Not only that, but dad also has to contribute his monthly income to the nursing home. He can only keep $45 per month, which means dad has no money to pay for the upkeep of the house.
You Can Still Keep the House
When the children realized that dad didn’t have money to maintain the house, they wanted to sell the house. We advised them not to sell the house because dad would have proceeds from the sale of the house as cash. This is not allowed, and meant that dad would lose his medicaid eligibility. He would also have to spend down the money from the house sale, before he is once again eligible for Medicaid. Essentially dad would lose his house to nursing home care expenses. The children decided to pay the bills and not sell the house, so that when dad passes away, they would inherit the house according to dad’s Will.
The problem is that with the estate recovery program, the children won’t inherit the house. Instead, the executor must sell the house to pay back the money spent on dad’s care. This is because dad had the misfortune of getting dementia. If dad had cancer, the children would not have to contemplate losing dad’s home. This is because dad’s cancer treatment is covered by Medicare.
Education is the Key
If the estate recovery program is removed, people who are eligible for Medicaid benefits are allowed to own a home. They will also not lose the home to Medicaid when they pass away.
The Estate Recovery program is one of the many things we talk about in our Three Secrets to Protect your Family and Finances Workshop. We focus on the ways to avoid estate recovery. We teach you all you need to know about estate planning, to make the right decision for your family.
You will learn about Wills and Trusts, and you will understand more about the different types of trusts. In Pennsylvania, the estate recovery program is limited to your probate estate. If the house is in an irrevocable asset protection trust, the state of Pennsylvania cannot take your house from you. This means you will also avoid probate. However, if the house is in your estate and your Will when you pass away, you cannot avoid probate. Come to one of our workshops to learn more. Register today on sechlerlawfirm.com/workshops.
