As if baby boomers didn't have enough to worry about, they are now faced with the possibility of caring for their parents as they themselves gear up for retirement. More and more people are becoming aware of the lack of resources available from the government for financing long-term care, defined as needing assistance with daily activities or supervision caused by a cognitive impairment. Just as aware are unscrupulous marketers who offer quick fixes to complicated issues. Near or at the top of the list of easy solutions are so-called "Medicaid friendly" annuities.
What is Medicaid planning?
Medicaid is a health insurance supported by the state and federal government. It is figuratively the safety net for millions of Americans who cannot afford health care. It is also used for payment of nursing home costs. Because it is a program based on financial need, applicants must either have limited assets and income or transfer those resources to qualify. Medicaid planning, practiced by elder law attorneys, is the name given to efforts to accomplish this goal. For years, elder law attorneys have used immediate annuities in Medicaid planning to protect the assets of families so they can qualify for long-term care Medicaid benefits. Federal law allows the assets of an individual, which otherwise would have to be spent on care in a nursing home, to be converted into income through the use of an immediate annuity.
Here is how an annuity works.
You give a sum of money to an insurance company and in exchange, they promise to pay you a monthly amount for a certain period of time, either for a fixed period or for your lifetime. The logic behind the use of an annuity in Medicaid planning is this: you give income to the facility and have Medicaid pay for the balance of the care cost rather than pay the much higher private (non-Medicaid) rate. For example, Fred needs skilled nursing home care, which in his state, costs $5,000 per month. He has $100,000 in assets, which the Medicaid program requires he spend on his care. Instead of paying privately, he purchases an immediate annuity, thus converting cash into income. Although the income goes to the facility, he instantly qualifies for Medicaid. Fred's family has an opportunity to receive the balance of payments if he dies before the annuity is paid out.
The Pitfalls of Buying Annuities for Medicaid Planning
Many insurance agents have picked up on the concept and have begun promoting the use of these so-called "Medicaid friendly" annuities when someone needs nursing home care. Whether they push them in a seminar setting, in a phone call or letter, or in a one-on-one meeting with you, here's what you need to be aware of before you consider purchasing an annuity.
The key question then is when do you think you will get sick and need nursing home care? If for example it's at age 85, the annuity cannot be longer than about 5 years. If there is a large sum of money, the monthly pay-out may exceed the cost of care, therefore disqualifying you from Medicaid benefits. The goal is to have Medicaid pay for care. The problem is that Medicaid only pays for what consumers want least - skilled nursing home care. Statistically only 1% of those between the ages of 65 and 74 will end up full-time in a skilled facility. The annuity owner is therefore forced to spend cold cash for home care, adult day care and or assisted care living.
States reacting to federal pressure and tight Medicaid budgets are aggressively restricting the use of immediate annuities. Many either ban their use outright or are allowing their use only if the state is the beneficiary. At best their future use in Medicaid planning is questionable. What if the owner outlives the annuity? The family gets nothing. The only way the family wins is if their loved one dies sooner rather than later.
You know when you're being sold a Medicaid friendly annuity if the insurance agent is looking to sell "Medicaid friendly" annuities as a quick fix, here are some headlines commonly used in ads or direct mail efforts that will tip you off..
1.. Well-kept secrets that lawyers, CPA's, and brokers don't know that will protect you from losing a lifetime of savings to nursing home costs.
2. How to qualify for nursing home payments with no out of pocket costs.
3. Learn about a government entitlement program that pays for nursing home care for seniors.
Explore An Alternative: Long-Term Care Insurance Before you consider an annuity purchase to qualify for Medicaid, speak with your insurance professional about how it compares with long-term care insurance, which is specifically crafted to pay for care where it is most wanted and needed, at home and in the community.
Ray Voelkle has earned the designation "Certified in Long-Term Care" or CLTC, after completing a rigorous multidisciplinary course focused on the profession of long-term care. He can be reached at the LTC-Financial Solutions, LLC Insurance Agency at 877-582-2048 or by e-mail at r_voelkle@yahoo.com.
No comments:
Post a Comment