If any of us could identify with any character from Greek mythology it would probably Sisyphus. A few might say it is Narcissus and a very few might be bold enough to say Zeus. The famous myth recounts the story of Sisyphus who was condemned to repeat the same meaningless task over and over again, i.e. pushing a boulder to the top of a hill, only to have it roll down and each and every time. The existentialist Albert Camus’s philosophy of the absurd might question in futility of it all if you take the extremely narrow view that we are born and then we die.
As one who never misses the opportunity to find a little humor in otherwise serious topics, i.e. the silver lining in the cloud, I might point out that if you have ever seen an artistic depiction of Sisyphus, you will be immediately taken by the more than superior upper thigh development as a result of his efforts. As a lifetime enthusiast of the Iron Game, I can assure you that he had a world class squat to show for his trials and tribulations. The point – nothing is in vain!
How does this play out in the real world? All of us have had a relative and loved one live through the indignity of a long painful illness played out in a nursing home. In a non-scientific way, the advancements of medicine seem to have extended the length of life without necessarily an increase in the quality. As I mentioned in my last article, I mentioned that unless you worked for the federal government or state, or the union, you are unlikely to have an adequate pension. When it comes to medical insurance including Medicare, the situation isn’t much better.
The federal Medicare program isn't the panacea you think that it is for seniors that are sixty five or older. The average American 65 or older faces $9,074 in health expenses each year, with Medicare covering only about half, because of services that aren't covered, such as dental work, or gaps in coverage plans, such as prescription drugs. A recent Mount Sinai School of Medicine study found that out-of-pocket expenses for Medicare recipients during the five years before their death averaged about $39,000 for individuals, $51,000 for couples, and up to $66,000 for people with long-term illnesses like Alzheimer's.
Many seniors can't come up with that kind of money, so they cut costs through such steps as skipping necessary care and rationing medications. Nationally, the percentage of filers who are 55 and older rose from 8 percent in 1991 to 22 percent last year — from 97,784 to 225,483 petitioners. Researchers say medical debt accounts for half of the nation's bankruptcies.
The issue of long-term care is not any different. A middle class or upper middle class works hard for forty-fifty years to raise a family and educate their children. If they are lucky and had some planning foresight, the couple may have accumulated a degree of comfort – a home without a mortgage; a decent pension and a small investment portfolio. However, like Sisyphus who thought he could take a small reprieve after pushing the boulder to the top of the hill, only to have it roll back down the hill, seniors find themselves confronted with the choice of paying for the cost of nursing home care at a cost of $90,000-100,000 per year because the wife has Alzheimer’s or preserving a small inheritance for their children and grandchildren.
This article focuses on a workable option to preserve the wealth of a middle class or upper class family to preserve an inheritance for the children and grandchildren. As the federal and state budgets tighten, the ability to do this type of planning has become much more restrictive. Nevertheless, extreme circumstances often call for extreme measures. The plan in this article may not work for many but it will work for some seniors.
Overview of the Healthcare Landscape for Senior Citizens
Five percent of seniors account for forty nice percent of healthcare expenses. The top five chronic illnesses include heart disease, hypertension, diabetes, asthma and mood disorders. One chronic illness that ominously stalks any retiree is the possibility of Alzheimer’s or another form of dementia. According to the Alzheimer’s Organization, one in three seniors dies with Alzheimer’s or some other form of dementia.
In 2013, the direct costs of caring for those with Alzheimer's to American society totaled an estimated $203 billion. Total payments for health care, long-term care and hospice for people with Alzheimer's and other dementias are projected to increase from $203 billion in 2013 to $1.2 trillion in 2050 (in current dollars). This dramatic rise includes a 500% increase in combined Medicare and Medicaid spending. The federal and state governments simply can’t afford this. How much more can you be taxed?
The average per-person Medicare costs for a senior with Alzheimer's and other dementias is three times higher than for those without these conditions. The average per-person Medicaid spending for seniors with Alzheimer's and other dementias is 19 times higher than average per-person Medicaid spending for all other seniors.
Financing the Cost of Long Term Care
The average cost of a semi-private room in a nursing home is $124,000 per year based on a survey from the insurer Genworth. The average cost in New Jersey is $109,500 for a semi-private room. The average cost in Florida is $84,000 depending upon the region within the state. A senior couple has two choices – spend all of their money until the reach the poverty level so that they can qualify for Medicaid.
The poverty level for Medicaid is for the instutionalized spouse nursing home qualification is $2,000 of assets and $50 per month of income. In 2014, the spouse of a Medicaid recipient living in a nursing home (called the "community spouse") may keep as much as $117,200 in asserts without jeopardizing the Medicaid eligibility of the spouse who is receiving long-term care. Called the "community spouse resource allowance," this is the most that a state may allow a community spouse to retain without a hearing or a court order. While some states set a lower maximum, the least that a state may allow a community spouse to retain in 2014 will be $23,445.
Meanwhile, the maximum monthly maintenance needs allowance for 2014 will be $2,931. This is the most in monthly income that a community spouse is allowed to have if her own income is not enough to live on and she must take some or all of the institutionalized spouse's income. The minimum monthly maintenance needs allowance – the income level below which a state may not allow a community spouse to fall if income from the institutionalized spouse is available -- is $1,938. in the lower 48 states ($2,422.50 for Alaska and $2,231.25 for Hawaii).
These figures apply only if the community spouse needs to take income from the institutionalized spouse. According to Medicaid law, the community spouse may keep all her own income, even if it exceeds the maximum monthly maintenance needs allowance.
Home Equity Limits
In most cases, the primary residence is an exempt asset for Medicaid qualification purposes. Medicaid will not cover long-term care services for applicants whose homes are valued above a certain limit. For 2013, that limit is $536,000, although states have the option of increasing this equity limit to $802,000. But the house may be kept with no equity limit if the Medicaid applicant's spouse or another dependent relative lives there.
Long Term Care Insurance
Long term care insurance never achieved the level of sale penetration the insurance industry expected. As a result, a small percentage of seniors have the necessary coverage to cover the cost of healthcare. Additionally, long term case as a voluntary benefit as part of corporate employee benefit programs never achieved a high level of employee participation. As a practical matter, the cost and difficult underwriting has made it difficult. Unfortunately, most seniors wait too long to purchase the coverage so that they are either uninsurable or heavily rated making the coverage unaffordable. Additionally, the seniors purchase coverage with benefits that are too low and without a cost of living adjustment. The more recent trend is to offer long term care coverage as part of a life insurance policy.
What do I do Now?
The issue of placing a spouse or parent in a nursing home is an immense and complex decision. On one hand, the community spouse who has been married to the institutionalized spouse since high school graduation for 50-60 years and has a tremendous sense of responsibility and guilt about placing the spouse in a nursing home. The tradeoff is that the physical and emotional strain of caring for the sick spouse frequently compromises the health of the community spouse so that the children have two sick parents to deal with at the same time. In many cases, the health of the community spouse becomes so compromised that the community spouse dies before the institutionalized spouse.
The children if they live near by the parents may provide as much care as they can but once it reaches a level of critical care such as Alzheimer’s, there is frequently no choice but admission to a nursing home. How can you pay for the cost of nursing care without the parents spending themselves into poverty and depriving their children and grandchildren of an inheritance that they worked forty years to accumulate.
The answer – Move to Florida. If your parents live close to New Jersey or in New England, consider moving your parents to New York. Why? Both states recognize the doctrine of spousal refusal.
Medicaid is designed to be the payor of last resort. Most of us would like Medicaid to be payor of first resort so that our parents can preserve their wealth for their children and grandchildren or so our parents don’t have to spend themselves down to the poverty level. The doctrine of spousal refusal or “Just say No” rule has been the law of all fifty states since 1988 and the passage of the Medicare Catastrophic Care Act. The law provides that
The institutionalized spouse shall not be ineligible by reason of resources determined under paragraph (2) to be available for the cost of care where- A) the institutionalized spouse has assigned to the State any rights to support from the community spouse; (B) the institutionalized spouse lacks the ability to execute an assignment due to physical or mental impairment but the State has the right to bring an action against a community spouse without such agreement; or (C) the State determines that denial of eligibility would work an undue hardship.
As a result, the law allows an institutionalized spouse to qualify for Medicaid benefits even though the community spouse retains assets over the community spouse resource allowance (CSRA) by refusing to make those assets available for the cost of long term care for the institutional spouse. The institutional spouse’s support rights are assigned to the state which provides nursing home benefits under Medicare.
New York and Florida are the only two states to have codified this law. However, budget concerns has had Governor Cuomo sharpening his pencil and taking aim at this benefit for New York residents which unlike many other states, provides home healthcare benefits. Many states have enacted code provisions that provide for the state government to pursue third parties for the full amount of assistance provided by Medicaid. Under Florida’s Medicaid Third-Party Liability Act, the state may enforce its rights to monies available for care.
In most states, there is no implied contract of support obligation between a husband and wife. Many states have repealed the common law doctrine of necessaries – the responsibility to pay a spouse’s debts. The Florida Supreme Court abrogated this doctrine in Connor V. Southwest Florida Regional Medical Center, 668 So. 2d 175 (Fla 1996). Unlike New York, Florida has never pursued recovery against a community spouse for nursing home and medical expensed paid by Medicaid?
This process is relatively straight forward.
1. The application should be accompanied by a statement of refusal signed by the community spouse.
The institutionalized spouse (or agent) signs an Assignment of Rights to Support. Most states have promulgated such a form by administrative rule. If the state has not created such a form, counsel should prepare the minimum assignment necessary to placate the state.
The application is processed with the government retaining the right to review all assets including those of the refusing spouse, but the determination of eligibility is processed as though a single person were applying. So long as the applicant is under his or her asset cap of $2,000, and meets the income test, the applicant is financially eligible.
Once eligibility is determined, the state makes payments to the nursing home or assisted-living facility
The financial stakes within a family are considerable. Unfortunately, with our parents living longer and the epidemic of Alzheimer’s a high percentage of us will need to deal with us. The cost of nursing home care is exorbitant. Multiply the annual cost by a three or five year stay and pretty soon, your parents would have used every cent that they earned over 30-40 years to reimburse the government or defray these costs. The traditional scenario for many families with elderly parents living in Florida become too old and sick and no longer independent. The community spouse is unable to provide for the institutional spouse at home without a significant loss of health. Moving parents back North has always been the way for children who live outside of Florida.
However, the financial practicalities of qualifying for Medicaid may cause clients to rethink this logic. Supplemental nursing care on top of nursing home care is readily available and inexpensive in Florida. It is easy and inexpensive to get to any of the major metropolitan areas within Florida. The spousal refusal doctrine as a Florida resident has to minimum time requirements.
If you are currently facing this options with your parents or a client, give serious consideration as a method for financing nursing home care.