Many have worked and saved for 40 or more years to build a nest egg that is designed to support themselves in retirement years. But so many have not saved enough in Retirement Savings (http://www.epi.org/publication/retirement-in-america/#chart1) or don’t have enough to pay for all types of health care costs at retirement.
Health Care is one of the biggest expenses and unknown variables at retirement. According to the Social Security Trustee report for 2015 (https://www.ssa.gov/OACT/TRSUM/index.html,) 49.2 million people received OASI benefits (social security), 10.8 million received DI (disability insurance) benefits. So the Government is doing part of the job. So how does a family plan ahead to pay what they can afford without going bankrupt? Hospital and Doctor and Prescription costs are covered by Medicare and supplement insurance. Eyeglasses, Dental and Hearing Aides are not cheap but they don’t drive you to the poor house either. The biggest health care issue is with extended long term care needs. Medicare and Insurance and Hospice cover specific situations like: Therapy, Skilled Care, Terminal or end of life needs. They even cover some medical supplies (Medicare DME (https://www.medicare.gov/coverage/durable-medical-equipment-coverage.html) but the chronic care that is needed with living alone or supporting a spouse with disease such as dementia, parkinsons, COPD, stroke can be difficult. Even aging to the point where one needs help with transferring from sitting to standing, or meal preparation, or dressing or just frailty or paying bills can be a big need. Most acute illnesses or needs are covered with Medicare or supplement or advantage plans but chronic are not. “So what!” some may say,..... until you see the cost!!
At that time 37.6 million people were covered by Medicare. Today its close to 53 million people. Even with advances in health care, the population of chronically ill are not easy to care for and are growing as the population of elderly increases.
Liquidate Assets: Sell off investments, cash in insurances, or borrow from home equity are frequent difficult choices when faced with these costs.
• Assets and Income are viewed differently. Medicaid planning helps you legally shelter assets ("some or all assets" sheltered depends on variables like: on amount of family help and availablity, costs of care, how long before you need care, how foar in advance you started planning ect.) Legally some assets are “Countable” and others are “Non Countable”. Income to the “community spouse” or health spouse is mandated with minimums. This income minimum offers some help... but not much to most families.
• Countable assets means “ these have to be used or sold to help offset the costs of care…” or “ you cannot keep these assets and expect the Medicaid program to pay” Countable assets can include the following: 2nd car, RV, Boat, 2nd home, rental property, business, gas and oil interests, stock, bonds, IRA, 401k, whole life insurance cash value, and others. Some items that are countable can be used to purchase non countable assets in an appropriate manner.
• Non Countable Assets can be: pre-paid funeral costs, certain types of trusts (assets in this type of account need to be handled in advance of the need for care to maximize the effectiveness) gifting strategies, and funds preserved for special needs children can all be a greater or lesser part of planning.
• Annuity Income: An asset (or lump sum of money) that has specific features when converted into a proper (see Ohio definition, http://codes.ohio.gov/oac/5160:1-3-05.3v1) income stream can be used to help. However due to state mandated beneficiaries choices this has not proven popular.
• Look Back periods: This is usually 60 months from the time of application to Medicaid. However this time period and when it starts and stops can be part of the plan and be used to benefit a citizen. When planning, hospital stays with extended care or SNF stays in the same time period may offer advantageous options. Review these with your advisor for specifics.