During our working years, meeting financial obligations can be a challenge; but when it comes to those obligations in retirement, it’s a different story altogether.   Most Americans plan on meeting their expenses during retirement with income from a variety of sources, including their retirement plans, pensions and/or Social Security.  

Depending on your health and actual retirement age, those income sources may need to sustain you for 30 years or more.   Unfortunately, many Americans fail to recognize one of the most expensive financial obligations during retirement: Healthcare Costs.

According to a recent Fidelity Investment report, the average American couple will spend approximately $240,000 during retirement on out-of-pocket Medicare premiums and healthcare costs.   That figure does not include what they might need to spend for Long-Term Care services.  If you're being proactive about your future healthcare and Long-Term Care needs, I encourage you to eliminate Medicaid as a planning alternative and consider every other option available for Long-Term Care Planning!!

The Medicaid Reality....

Medicaid is essentially a welfare program!!  It is funded by the state & federal government to provide healthcare for the poor and indigent; and even if you're comfortable with the thought of becoming Medicaid "eligible", you need to consider the consequences of doing so.  For instance.....

• Even though most people would prefer to receive care in their own home, nursing home care is generally the only Medicaid option for Long-Term Care services.   Options such as assisted living, home health care or adult day care are not usually available for those on Medicaid.

• Medicaid may pay the bill for nursing home care, but there’s little choice in where that care is provided.   Nursing homes are not required to accept new patients who are on Medicaid, so while there may be an open space in a facility right in someone’s neighborhood, it's likely "private-pay only".  This means you could end up in a facility across town or even across the state, where a "Medicaid bed" is available!

• Medicaid patients do not get private rooms and you would be forced to accept the facility you're offered.
  

Qualifying For Medicaid May Be More Difficult Than You Think.... 

While the requirements vary by state, there are limitation on both INCOMEand ASEETS in order to qualify for Medicaid.   According to Medicaid.gov, individuals and/or couples will need to "spend down" to $2,000 in counted assets, or $3,000 for couples living together.  Homes don't count toward the total, and neither do vehicles, personal belongings or assets held in trust. 

If one spouse is not living in a nursing home or another institution, most states allow that person to keep half the couple's assets between, set minimum and maximum amounts, which range between $21,912 and $109,560.  Many people often think it’s possible to transfer assets to qualify for Medicaid, but the “Look Back” period makes this quite difficult, as Medicaid "looks back" at someone's financial transactions to determine if assets have been moved around.   

The Deficit Reduction Act of 2005 made the transfer of assets much less practical by implementing a 5-year look-back provision, instead of the previous 3-year look back period.  Given our country's current fiscal situation, at both the state and federal levels, even the five-year look back provision is under review and it could be lengthened in the near future.



Show Me The Money..... 

The really tricky part of qualification actually has to do with INCOME.  Eligibility is tied to an applicant's household income, and how it measures against the federal poverty level.   The income limitation for an individual is currently $1,838.75, which includes Social Security benefits.   According to the Social Security Administration, "the average monthly Social Security benefit for a retired worker was about $1,230 at the beginning of 2012."  

Based on the current data, many retirees who had even slightly better than average lifetime earnings (or a widow/widower drawing survivor benefits), could exceed the maximum qualification limits.   Many Americans are designing retirement income plans to maximize Social Security benefits.   However, without an understanding of the relationship between Social Security, future healthcare costs, Medicare and Medicaid, much of that planning could be setting you up for a harsh reality.  

Long-Term Care Planning should be part of the discussion, as the notion of impoverishing yourself late in life is just not a good idea.   Regardless of your financial position, now is the time to address future Long-Term Care needs as part of a comprehensive financial plan....