Question: My mother suddenly needs to be in a nursing home. Should I use her assets to help her qualify for Medicaid?
Answer: If your mother is in a situation where she needs nursing home care, you may think your only option is to use her assets so that she can qualify for Medicaid. Unlike Medicare, Medicaid pays for long-term care. However, cutting the older parents’ money into the final dime may not be the only solution.
Of the various retirement costs you may know to plan, health care is probably the most difficult. Fidelity estimates that an average of 65-year-old retired in 2024 can be expected to incur $165,000 in medical expenses throughout the next year. And the estimate does not take into account long-term care.
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The administration for Community Living reports that there is almost a 70% chance that people today, turning 65, will need long-term care services in their lifetime. And, not surprisingly, women tend to need longer-term care than men (2. average 3.7 years compared to 2 years, respectively).
The problem is, however, that long-term care needs can suddenly arise. And if you think Medicare will pay for it, you’re grossly wrong.
Medicare essentially covers medical costs only. Long-term care is generally detention, which is a major distinction.
Needing the help of everyday activities such as dressing and bathing is a common by-product of aging. However, unless it is related to a particular illness, injury, or surgical procedure, Medicare is unlikely to pick up the tab.
How to protect your assets and still qualify for Medicaid
Genworth’s latest cost-of-care survey shows the average annual nursing home bill is $111,325 for shared rooms and $127,750 for private rooms. These are costs that many retirees cannot afford.
Middle class trap
Meanwhile, retirees who are comfortable and not wealthy often fall into traps. They have too many assets to qualify for Medicaid, but in the end they don’t have enough money to pay for nursing home care without breaking completely.
Evan Far, a certified elder law lawyer, explains that there is a general $2,000 limit on assets that can be spent to qualify for Medicaid. However, he says, “A experienced elderly lawyer helps people protect their assets every day.”
In fact, Far says that married couples often can protect 100% of their assets in these situations. And there are many legal and ethical asset protection strategies that knowledgeable lawyers can use.
Single Trap
Now Farr admits that the rules are different and unfortunately it’s not very good for singles.
“But we still have a strategy,” he insists. It generally claims that it can protect 40% to 70% of a person’s assets.
“You have to spend some money to pay for care, but not everything,” he explains. So, if you’re in a situation where you have parents who need nursing home care, you don’t just spend. Instead, consult a professional.
Michael Murray, President/Financial Planner of AIF, CPFA and Peabody Wealth Advisors agree.
“As a person, the best strategy is to consult an elder care lawyer about a manageable, trustworthy setup,” he says.
But to be clear, protecting assets is not simply a matter of maintaining inheritance. Rather, that is important because, as Far explains, the money can be used to provide supplementary care to parents entering nursing homes. This includes payments for denture replacements, hearing aids, cell phone bills, and other services that are not normally covered by traditional nursing home fees.
Extra funds for extra eyes
Plus, as Farr says, “In some cases, if a parent benefits, they can use the money they are protected to hire a private sitter to stay with their parents in a nursing home.
It is no secret that nursing homes have been extremely understaffed these days. Having extra funds to pay private caregivers can lead to a much more positive experience and level of care.
How to use assets
Murray also explains that there is a misconception about how to spend assets to qualify for Medicaid.
“You can’t give money to a child,” he insists. But he says that careful planning can help you spend your assets in meaningful and useful ways, such as funeral advances and home improvements.
Far also argues that there is a misconception about protecting assets in the Medicaid context.
“‘skin’ is a dirty four-letter word in our industry,” he says. “We don’t hide our assets. We legally evacuate assets. Ethical and moral terms are no different from income tax plans that are trying to regain the maximum refund.”
Long-term planning is still a must
It may be nice to know that there is a way to get nurse compensation through Medicaid without spending all the last penny you or your loved ones who worked so hard to save. However, Murray says it is essential to acknowledge that the above strategies are “not a way for the rich to protect their assets.”
He also argues, like Farr, that strategic Medicaid plans are not a replacement for long-term care plans or long-term care insurance. In fact, Murray recommends prioritizing long-term care insurance, as underwriting requirements for these policies can be very strict.
Meanwhile, Far explains that while Medicaid generally covers the costs of care at nursing homes, life support is a different story.
“For five to ten years, the majority of people who sometimes need supplementary living levels of care are caught up in the process of getting care for the elderly,” he explains. “People with dementia often have a slow decline and that low level of care is not paid to Medicaid.”
How about Medicaid cuts?
A recent Kaiser Family Foundation poll found 83% of people have a positive view of Medicaid. However, the Medicaid cuts for the so-called One Big Beautiful Bill (OBBB), which was signed into law on July 4th, cost around $1 trillion, and you may be worried about using Medicaid as a later fallback option.
There may be some good news in the long-term care context.
“I think nursing homes are going to avoid the worst of these cuts,” Murray says. “It’s under 65 and the healthy ones they’re focused on.”
That said, Murray warns that immigrant crackdowns will hurt nursing homes.
“If they don’t get help, it will raise their costs to hire skilled nursing care,” he argues.
Murray also warns that the proposed cuts could affect nursing home care over time.
“If you cut as much as they’re talking about, it’s ultimately tricked by Medicaid in long-term care,” he explains. “The state doesn’t have these pools of money to compensate for these types of cuts, which could cause other issues.”
Far agrees.
“They’re targeting low-income Medicaid, which is what they perceive as people are abusing,” he says. “But I don’t know how it drips.”
