Medicaid is a joint federal and state program designed to assist the needy. One of the program’s functions is help pay skilled nursing home expenses for people who meet certain conditions. However, middle-class seniors who plan to rely on Medicaid to cover their long-term costs may find that government cutbacks could mean that they’ll have to pay more of the cost themselves.
According to a report given to Congress by the National Governors Association (NGA), Medicaid has become the nation’s largest payer of long-term care services funding approximately 50% of long-term care spending and nearly two-thirds of all nursing home residents. And if the current trend continues, these numbers can only grow. As a result, the NGA has proposed recommendations to encourage greater personal responsibility and discourage the reliance on Medicaid-financed long-term care.
In its effort to slow the number of seniors enrolled in Medicaid, the NGA offered the following suggestions:
- Tax credits and deductions for long-term care insurance – Only 11 percent of the population 65 and older and 8 percent of those between ages 55 and 64 own long-term care insurance. The NGA wants to boost these numbers. Under current regulations, you can deduct long-term care premiums but only if they exceed 7.5% of your adjusted gross income. Tax credits and more liberal deductions would encourage more people to invest in long-term care insurance.
- Long-term care partnerships – Four states ( California , Connecticut , Indiana , and New York ) operate a partnership between Medicaid and the long-term care industry. The basic concept is that individuals with long-term care insurance who use up their benefits would be allowed access to Medicaid while protecting some of their assets. Federal law prevents other states from participating. However, the NGA’s Report recommends that all states be included.
There's no assurance that Congress and the President will agree with the NGA’s report. Nevertheless, there is pressure to reduce Medicaid spending and put more responsibility on individuals.
Of course you may never need long-term care. But it was estimated that about nine million men and women over the age of 65 would need long-term care in 2007. And by 2020, 12 million older Americans will require special medical assistance. Furthermore, a study by the U.S. Department of Health and Human Services says that people who reach age 65 will likely have a 40 percent chance of entering a nursing home. About 10 percent of those who enter a nursing home will stay there five years or more. All of this should be a red flag to anyone counting on government aid for long-term care.
If you don’t want to bet on M ed icaid paying for your long-term care expenses, complete and return the enclos ed coupon to learn about the other options.
Medicaid Reform A Preliminary Report, http://www.nga.org/Files/pdf/0506medicaid.pdf
IRS Publication 502, http://www.irs.gov/publications/p502/index.html
http://www.medicare.gov/LongTermCare/Static/Home.asp
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