Why the Failure to Plan for Your Long Term Care Can Have Devastating Consequences

By: Anthony J. Enea, Esq.

In a study published April 3, 2013, the RAND Corporation estimates that the monetary cost of dementia in the United States ranges from $150 billion to $215 billion annually. According to the study, the cost of dementia to the nation is greater than that of heart disease or cancer. Further, dementia care costs are expected to double by 2040.

As the number of individuals requiring long term care continues to grow, one of the first things that will be tested is whether our existing system can adequately handle the surge. Traditionally, most individuals suffering from advanced dementia and/or other Alzheimer’s and Parkinson’s related illnesses in Westchester County were treated in nursing homes. However, over the last decade there has been a significant shift from this model of care to one with greater emphasis upon “aging in place.” Today, more and more of these individuals are receiving care either at home, in an assisted living facility or in a continuing care retirement community for significantly longer periods of time.

Regardless of the housing option chosen, the need will still exist for significantly larger numbers of trained health care providers to attend to a growing aging population that is living longer. Westchester will require more physicians trained in geriatric medicine, qualified home care providers and aides, assisted living facilities and even nursing homes within the next 20-30 years.

For seniors not financially eligible for Medicaid and who have not purchased long term care insurance or engaged in long term planning, the cost of such care can be devastating. For example, in Westchester County the average private cost of 24/7 care at home can average between $7,000 to $10,000 per month when utilizing a qualified agency. Obviously, this is significantly less expensive than the cost of a nursing home, which in Westchester averages from $385.00 to $425.00 per day ($140,525 to $155,125 per year). Unfortunately, these costs have consistently increased annually at double-digit percentages, and it is difficult to estimate with any degree of certainty what the costs will be in the future.

Fortunately there are a number of planning options available to seniors which will allow them to shelter their assets from the cost of care, such as gifting of assets, utilizing an Irrevocable Medicaid Asset Protection Trust, and/or purchasing long term care insurance. Implementing these options prior to needing care is imperative.

If one is financially and categorically eligible, the federal/state program providing care for seniors either at home or in a nursing home is Medicaid (not Medicare). Medicaid is a “means tested” entitlement program that looks at both the resources (savings) and income of the senior to determine eligibility. For example, if a senior is single, he or she is not allowed to have more than $14,400 of savings and no more than $800 or $820 per month of income to be eligible for either nursing home or home care Medicaid. However, spouses are permitted to transfer assets to each other to help meet the financial eligibility requirement. The spouse to whom the assets have been transferred may need to execute a “spousal refusal” stating that he or she refuses to utilize his or her income and resources to support his or her spouse.

As can be seen from above, Medicaid is a complex program. It is also a significant financial drain upon the State and County governments that must share its cost with the federal government. However, unlike the federal government, the state and counties don’t have the ability to print money.

Over the years, various concepts to limit the financial exposure of seniors and the government to the cost of long term care have been proposed without much success. For example, the New York State Bar Elder Law Section in conjunction with others proposed a “Compact for Long Term Care.” This proposal would limit the exposure of seniors to the cost of their care if they funded a portion of the care they required. This funding requirement could be satisfied by the senior’s own personal finances or through the use of long term care insurance the seniors had purchased.

While from time to time novel ideas are proposed, in reality seniors only have two truly effective advance planning options - purchase long term care insurance and/or transfer a portion of their assets to an Irrevocable Medicaid Asset Protection Trust or to their loved ones. The transfer of assets to a Trust will create a five year look back period (ineligibility period) for purposes of Medicaid nursing home eligibility (not Medicaid Home Care). However, once the five years have elapsed the assets transferred will not be counted as available resources.

Advanced planning is imperative for seniors who wish to shelter their life savings from the cost of long term care. The RAND Corporation’s recent findings remind us that such steps are more critical now than ever before.

Anthony J. Enea is the managing member of Enea, Scanlan & Sirignano, LLP of White Plains, New York. He is the Immediate Past Chair of the Elder Law Section of the New York State Bar Association and a founding member and Past President of the New York Chapter of the National Academy of Elder Law Attorneys.

He is the recipient of the Above the Bar Award for 2013 as leading eldercare attorney.

He concentrates his practice on Elder Law, Medicaid Asset Protection Planning and Applications, Wills, Trusts and Estates, Guardianships and Special Needs Planning.

He can be reached at 914-269-2367 or Aenea@esslawfirm.com. He is fluent in Italian and has an additional office in Somers, New York.