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Paying for the Nursing Home

David Silver teaches The Legal Environment of Business in ECU's Department of Finance. Dave is also a Partner with The Graham.Nuckolls.Conner Law Firm in Greenville, NC, concentrating in Elder Law

Mom had a stroke and now she needs to be in a nursing home for the rest of her life, how can we afford that? How can I make sure that my kids don't have to pay to take care of me if I need to go to a nursing home? Will the nursing home take my house? If you don't have a high fixed-monthly income, a lot of money in the bank or a good long-term-care insurance policy, the answers to these very common questions will require some understanding of Medicaid.

In North Carolina, we have two levels of nursing care: Assisted Living and Skilled Nursing. Assisted Living is the "rest home" that takes care of (usually elderly) people who don't need a nurse, but do require help with some of their activities of daily living (nutrition, hygiene, medications, etc.). Some people choose to live in Assisted Living facilities in order to live in a safe and social environment rather than living alone and isolated in their home while experiencing diminishing physical and/or mental capacity. Assistance to help pay for this type of care is a topic for a future article.

Skilled Nursing is the "Nursing Home" where the person requires care from a nurse. No one wants to go to a Skilled Nursing Facility, they end up there. The typical path is a stroke or a fall, followed by a stay in a hospital for a few days or more, then a subsequent release to a rehabilitation facility. When the rehab is over and a physician determines that continued skilled nursing care is required, then that person will need to be placed in a Skilled Nursing Facility. (Many rehabilitation facilities are also Skilled Nursing Facilities).

Medicare pays for 20 days of rehab and most Medicare plans pay a large percentage of the cost of an additional 80 days of rehab as long as it serves to improve or maintain the patient's condition. However, Medicare does not cover the cost of the Skilled Nursing Facility, and the average cost of a Skilled Nursing Facility in North Carolina is $6,300 per month. If you can't afford this cost, there is a government program that helps pay for this type of care, which in North Carolina is called Medicaid. If you qualify, Medicaid will pay the difference between your income and the cost of care at the Skilled Nursing Facility.

In order to qualify for Medicaid, you must meet a medical test, an income test and an asset test. The medical test simply requires your doctor to fill out a form (called an FL-2 form) stating that you require care at a Skilled Nursing Facility. The income test requires that your income (not including your spouse's income) be less than the Skilled Nursing Facility's Medicaid reimbursement rate. Basically, if your social security and pension income is less than $5,000 per month, you will likely pass this income test.

The final Medicaid qualification test is the asset test. If you are single (or a widow/widower), you may not have more than $2,000 of "countable" assets. If you are married, Medicaid counts the assets owned by both you and your spouse, even if you have a prenuptial agreement, and the rules are a little more complicated. Your spouse may keep half of the countable assets up to about $230,000, but is allowed to keep all the countable assets up to $23,184. The rest of the countable assets would have to be "spent down."

What's a "countable" asset and how can you "spend down" these assets? A residence and one vehicle are usually not countable assets, meaning that you do not have to sell them to qualify for Medicaid. Cash, retirement accounts and investments usually are countable assets, meaning that these funds would have to be spent down. It is usually okay to spend down countable assets by pre-paying for a funeral, paying legitimate debts and paying for health care. There are many rules about what constitutes a "countable" asset and what is permissible when "spending down" assets, so it is often worthwhile to consult with an attorney specializing in this area of law to discuss what can be done without disqualifying you for Medicaid.

You can not simply give away your assets in order to qualify for Medicaid. If you have given away assets or transferred assets for less than full value within five years of applying for Medicaid, you will be ineligible for Medicaid for one month for every $6,300 that you have transferred. This penalty period does not begin to run from the date of the transfer, it begins to run after you are in the Skilled Nursing Facility and have spent down all of your assets to under $2,000. There are times when gifting assets might be appropriate, and there are ways to fix the damage done by past gifts, but the details of these circumstances would require individual legal analysis beyond the scope of this article.

If you do qualify for Medicaid, the State of North Carolina will have a claim against your estate at your death for the amount that Medicaid paid for your long term care at the Skilled Nursing Facility. If you don't have anything in your estate when you die, then this claim is of no consequence. However, if you had some non-countable assets when you applied for Medicaid (such as your residence) and these assets are part of your estate when you die, then these assets may have to be sold in order to pay Medicaid's claim (this is a process called "estate recovery"). There are sometimes opportunities to protect some assets from estate recovery. If it is important to you to try and ensure that your residence is protected for your kids at your death, then it is usually beneficial to discuss estate recovery with an attorney practicing in elder law.

If you do have that stroke and are heading to the Nursing Home, you will likely be unable to participate in the conversation, nor be able to take any action, regarding countable assets, spend down or estate recovery. For this reason, it is very important that your loved ones have your Power of Attorney (as we discussed in my previous article) in order to take action on your behalf.

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