It’s no secret the baby boomers are getting older, which means there has been a dramatic increase in the need for affordable long-term support services in America. Costs for long-term senior care are getting increasingly expensive, and many families are wondering what to do and how to pay for a long-term care insurance policy or monthly bills from a nursing home. According to the US Department of Health & Human Services, Americans aged 65 or more have a 70 percent chance of requiring long-term care services. Families absorb these costs, and caregiving efforts, for their loved ones because Medicare does not cover long-term care. As a result, many Americans turn to Medicaid to help with the cost of long-term care. However, there are both misconceptions and problems with the Medicaid program that leave many families unsure what the right direction is for them.
According to MedicareGuide.com, the average American man turning 65 between 2020-2024 will require 2.3 years of long-term care, while women, on average, will require 3.2 years of long-term care. Many aging Americans believe Medicaid coverage for long-term care kicks in only after they meet qualifications for the program and are impoverished. They worry about needing to sell their home to meet the poverty levels. You do not automatically have to sell your home to qualify for Medicaid; but, this does not mean your home is completely protected either.
Owning a Home and Medicaid Eligibility
Medicaid will not count the home of an applicant as an asset when determining program eligibility, as long as the resident intends to return to that home – although some states will require proof of how likely someone is to return home. In addition to living in the home, the resident’s home equity must also be less than $603,300 (or in some states, $906,000). This number is calculated based on the home’s fair market value minus any debts secured, such as a mortgage or home equity loan.
Your home does not need to be sold to qualify for a Medicaid-funded long-term care facility, but the state will typically place a lien on your home during your lifetime. However, if you live with a spouse, a disabled or blind child under 21, or a sibling with an equity interest in the house, the state cannot place a lien on the property.
All of this means that you don’t necessarily need to give up your home to qualify for Medicaid, but the partnerships between state and federal governments to provide Medicaid long-term care coverage are not financially stable. The programs operate at a loss because they have no place to recover the funds, and long-term care is the program’s most expensive benefit.
What are the Issues with the Medicaid Program?
US seniors hold $8.05 trillion home equity and McKnight’s Senior living reports that 78.7 percent of the 54 million elderly Americans own homes. The Omnibus Budget Reconciliation Act of 1993 requires state Medicaid programs to recover some of the cost of care provided but the law basically says you will not be financially wiped out if you need long-term care. However, in the absence of a qualified surviving dependent’s need, your estate will pay back the cost of your care. The goal of this law was to protect those who did not save enough to pay for long-term care, but long-term care is so expensive these days, even people who did plan for retirement are often unable to pay the premiums for the care – so Medicaid is the answer they turn to.
With Medicaid programs already operating at a loss, and more seniors needing long-term care assistance, it’s clearly unsustainable. To make things more challenging, the Medicaid and CHIP Payment and Access Commission (MACPAC) recommend Congress make Medicaid estate recovery voluntary. This recommendation reduces potential recoveries and limits reimbursement prospects. But ultimately, this proposal will increase federal expenditures and reduce the funds available to Medicaid. States already tend to not seek recovery via estates unless the return is more significant than recovery cost.
In the long run, decimating the ability for Medicaid to recover some repayment from an asset pool of over 8 trillion dollars can potentially bankrupt the Medicaid program. No one wants to take homes away from Americans living in them, but the desperate need for affordable long-term care is only going to get worse. Americans need public-private partnerships to rethink the handling of long-term care in this country. The middle class, in particular, needs a way to pay for long-term care without having to rearrange their finances, or put their house at risk, to qualify for Medicaid. It is incumbent upon the US Congress to find ways to protect its ever-growing senior population without bankrupting the social safety nets put in place for their protection. It’s important we all work together to protect both our seniors’ healthcare needs today and our social safety programs for future generations.