One of the facts of aging is that some of us will eventually be
unable to take care of ourselves and will need some form of
assistance, either with home health care, an adult care home or a
nursing home. Aside from the personal aspects of being debilitated,
which can be devastating, there is the equally devastating financial
cost. In Arizona, the cost of a nursing home is $3000-4000 per month.
At that rate it would not take long to deplete the resources of most
families. What can be done to protect against this potential
impoverishment? Among options available to us are what might be called
"self insurance" whereby we use our own dollars to pay for
the costs. That might be done through savings or long- term care
insurance. Another option is reliance on federal support through
Medicaid (Arizona Long-Term Care System-ALTCS- in Arizona).
Insurance
We all know about the usual methods of accumulating dollars that
might be used to cover cost of care such as IRAs, CDs, scrimping, etc.
The insurance option is long-term care insurance. It comes with many
variations but generally it pays for the home health care or nursing
home costs. Now, having a long-term care policy has become even
better. The Kassebaum-Kennedy bill makes premiums for long-term care
insurance deductible from your federal income tax. The maximum
deductible varies with age. If you are forty or less, the most you can
deduct is $200. At 50-60 you can deduct $750 and over 70 the maximum
is $2500. This is pretty much in line with what you might pay at those
ages.
The amount deductible is subject to the over-all maximum deductible
of 7 ½% of adjusted gross income, or 10% with the alternative minimum
tax treatment of medical expenses. (Check with your accountant for
exact details.)
If the time comes for you collect from the long-term policy,
payments up to $175 a day are tax-free regardless of your actual
expenses. If the benefits paid are not on a per diem basis, the
payments to you are still tax free, even if they exceed your actual
expenses. For more details, click
here.
ALTCS Requirements
Dollar values updated for 2009
If you don't have the insurance or you don't have the financial
cushion when a long-term need arises, the remaining option is ALTCS.
If you meet the eligibility requirements, ALTCS will guarantee a
nursing home bed or will supply in-home respite care. It will pay room
and board, medications, and what is considered medically necessary.
There are two sets of criteria used to determine eligibility,
medical and financial. To be medically eligible, the individual must
score a minimum number of points during a physical examination given
by ALTCS appointed medical personnel. Points are given for varying
degrees of inability to handle the activities of daily living. The
more functionally or medically disabled the person is, the more points
are given.
Because ALTCS is a needs based program, only those able to show
minimal income and assets are financially eligible. In Arizona, there
is a standard for married couples and one for single applicants. The
differences are in what is excluded when assets are totaled. In any
case, the applicant can have no more than $2,000 in cash equivalents
and, for a single person, not more than $2,022 in monthly income.
Proper planning with an attorney familiar with this system can greatly
limit the impact of these severe requirements. Do not just spend until
you reach the $2,000 limit.
Medicare
Dollar values updated for 2009
One assumption often made is that if you are covered by Medicare,
you have long-term care taken care of. Not true. Only Medicare Part A
covers any hospitalization or post hospitalization care costs, and
that coverage is very limited.
Hospitalization
Part A generally covers the first 60 days of hospitalization for one
"spell of illness" with a deductible of about $1,068. It then
pays day 61 through day 90 with a required co-pay of about $267/day.
If more days are required, there are 60 lifetime days available to
tack on after day 90. Those lifetime days will have a co-pay of about
$534/day. Once those lifetime days are used they are gone forever. The
first 90 days are renewable with a new "spell of illness".
Note that none of this is really long-term care.
Post-hospitalization
Only if a skilled nursing facility is needed will Part A cover any
costs of care after leaving the hospital. Skilled care is required
primarily where there is a reasonable chance of rehabilitation but can
include preventing further deterioration. To be eligible for coverage,
an individual must have had at least a three day hospitalization and
must enter the skilled nursing facility within 30 days of discharge
from the hospital. The first 20 days are covered 100%. The next 80
days have a co-pay of about $133.50/day. There is no coverage past these
100 days. Part A will not pay for the custodial care in a nursing home
which is what constitutes most long-term institutional stays.
For more information please contact the Law Office of Paul C.
Moors.
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