When you work and pay FICA or self-employment taxes, you earn retirement credits that lead to Medicare eligibility. You get four credits a year if your income exceeds a very nominal threshold, and you will earn eligibility when you have accumulated a total of 40 credits.
A married person can qualify on their spouse’s work record, so the vast majority of senior citizens can enroll in the Medicare program when they reach the age of 65.
Sine this is a health insurance program for senior citizens, you may be lulled into a false sense of security when it comes to the expenses that are covered.
Long-Term Care
More than half of seniors will need paid long-term care eventually, and 13 percent of them will require the assistance for at least five years. Long-term care expenses are considerable, and Genworth Financial has been keeping tabs on the costs around the country for a number of years.
We practice law in Naperville, Illinois, and the surrounding area, and according to Genworth, the median annual charge for a private room in a nursing home in our area last year was $102,383. The median cost for an in-home health aide was $60,632 in 2020.
Medicare does not pay for long-term care, but Medicaid will pick up the tab if you can gain eligibility. This is why Medicaid should be on your radar even if you will qualify for Medicare when you are 65 years of age.
Medicaid Eligibility
You cannot qualify for Medicaid if you have more than $2000 in countable assets, but some assets are not counted. Your home is exempt with an equity limit of $603,000 this year.
If a healthy spouse is residing in the home while their spouse is entering a nursing facility, there is no equity limit.
The fact that you can qualify for Medicaid while you are still in possession of a home is comforting on the surface, but there is more to the story.
Medicaid is required to seek reimbursement from the estates of beneficiaries after their passing. Yes, you can qualify as a homeowner, but a lien can be placed on the property after your death.
Other non-countable assets include one vehicle, wedding and engagement rings, heirloom jewelry, household effects, and personal belongings. You can also have unlimited term life insurance, $1500 of whole life insurance, and $1500 saved for final expenses.
Spousal Allowances
When a married individual is applying for Medicaid while their spouse is still going to live in the community, the healthy spouse is entitled to a Community Spouse Resource Allowance. This is half of the shared assets that are countable, but there is a limit. In our state, the limit is $109,560.
A Medicaid beneficiary can receive a monthly personal needs allowance of $30, and the rest of their income must go toward the cost of the care that is being received.
However, if a healthy spouse is relying on the income, they can qualify for a Monthly Maintenance Needs Allowance. They would be able to keep the income, but there is a limit of $2739 a month this year.
Medicaid Trust and Five-Year Look-Back Period
You can get countable assets out of your name to qualify for Medicaid if you convey them into a Medicaid trust. This would be an irrevocable trust, and you would surrender access to the principal, but you could receive income that is generated by the assets in the trust.
If you apply for Medicaid, the assets would not count if you act in advance. There is a five-year look-back period, so the funding must be completed at least five years before you submit your application for Medicaid coverage.
A penalty would be imposed if you violate this rule, and it would be tied to the cost of nursing home care and the amount of the divestiture. For example, if you fund a trust with enough to pay for 18 months of nursing home care, your eligibility would be delayed by 18 months.
We Are Here to Help!
Our doors are open if you are ready to work with a Naperville, Aurora, North Aurora, Montgomery, Oswego, Batavia, Downers Grove, Bolingbrook, Woodridge, Illinois elder law attorney to put a plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 630-568-8611.
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