The rules for accessing entitlement programs to pay for ongoing healthcare needs are very tricky, and it's best to seek legal assistance, advises Stephen J. Silverberg, an elder care attorney and immediate past president of the National Academy of Elder Law Attorneys in NY.
“Don't listen to relatives who think they know what they're talking about,” warns Silverberg. “Amateurs teach amateurs to be amateurs. Go see a professional. Never listen to anybody else.”
For instance, let's say a child or a sibling volunteers to quit working to take care of an elderly relative and the rest of the family agrees to pay a salary to him or her. What's the best way to go about it? Should you draw up a family care contract that specifies the number of hours a week, the rate per hour and the job responsibilities?
Sounds reasonable, but Silverberg points out that the payments must be reasonable and customary for the region, plus someone — typically, the person receiving the care — must act as the “employer” and file withholding taxes, workman's compensation and other required employment taxes. Of course, the caregiver must declare the payments as income. If the patient is incompetent or too sick to deal with these details, a person who has been granted Power Of Attorney can act on his or her behalf to handle the paperwork and taxes. Silverberg likens the POA to “the second set of keys to the car.”
“[The contracts] are valid but can be more trouble than they're worth,” says Silverberg.
OK, so you'll just pay the caregiver in cash. If the patient plans on applying for Medicaid — which is means-tested and takes into account all sources of earned and invested income over the past five years — such routine payments will raise a red flag. Unless there's a family care contract, Medicaid considers such payments a transfer of assets, and counts the funds towards the patient's assets when determining eligibility.
Patients enrolled in Medicaid can take advantage of state-run programs that provide money to pay for personal care aides and even home modifications to help them live independently. To find out if your state has such a program visit www.cashandcounseling.org/about/participating_states.
States provide up to half the funding for Medicaid, so eligibility and coverage differs from state to state. To qualify for Medicaid, your monthly income cannot exceed $767. NY and some states allow you to spend down any income exceeding that cap on healthcare costs like meds and co-pays so you can qualify, but others do not. In all states, Medicaid pays for nursing home care, home health care and medical equipment, such as wheelchairs and hearing aids, but some states also cover physical, occupational and speech therapy. To find out eligibility requirements and coverage, contact Medicaid in your state. (www.money-zine.com/Financial-Planning/Buying-Insurance/Medicaid-Application-by-State/)
SPECIAL NEEDS TRUSTS
Alternatively, you could set up a special needs/supplemental needs trust (SNT). These trusts are usually created by parents who have a special needs child to ensure continuity of care after they pass away, because it is not disqualified from Medicaid even though he or she is a beneficiary. Couples can establish an SNT in their wills so the assets of the deceased spouse won't disqualify the surviving spouse from receiving Medicaid.
Keep in mind that while Medicaid doesn't count these funds towards your monthly income limit, the same does not hold true with a living trust.
SNTs can also be used to take care of other disabled family members. Silverberg cites the example of an aunt and niece who are both disabled and live in the same home. The aunt can create a SNT for her niece because she's disabled. Since Medicaid exempts transfers to trusts for disabled individuals, the aunt and niece are eligible to receive Medicaid.
Like Medicaid, Medicare is government-provided health coverage that pays for a wide variety of healthcare needs, from artificial limbs to vaccinations. But it does not pay for long term care, including assisted living, residential care facilities or adult foster care. Log on to www.medicare.gov/coverage/home.asp for a detailed listing of coverage and contact numbers.
Anyone receiving Social Security benefits is automatically enrolled in Medicare. Someone nearing retirement age must apply for Social Security and Medicare at the same time, three months before the month he or she turns 65 years old.
One component of the Affordable Health Care Act, taxpayer-financed coverage for long-term care. For as long as you need care, the program will provide a daily cash benefit of $50 to $75, which could be used to offset the cost of an adult day care program or pay for a home care aide to help with daily activities like bathing and dressing.
While people with pre-existing illnesses are not excluded, there is a catch: Before accessing coverage, you will have to pay premiums for five years — and for three of those five years you will need to be employed in a full-time or part-time job. Other details remain unclear — the program may not kick in until 2013, and monthly premiums have been estimated as being as low as $123 or as high as $240.
The program's viability is still being debated by fiscal and healthcare policy experts. However, it is meant to encourage people to take personal responsibility for their long-term care. Medicare estimates that 12 million older Americans will need long-term care by 2020, and a study by the U.S. Department of Health and Human Services suggests that people aged 65 years and older have a 40 percent chance of entering a nursing home during their lifetimes.
© 2010 American Heart Association, Inc.