When one spouse enters a nursing home, the well-spouse often wonders what of the couple’s assets and income will be left for her. Most people are just making it with all of their assets and all of their income, so the thought of losing a large percentage of a couple’s assets and income to long-term care costs can be very frightening.
There are two primary methods of paying for long-term care, such as care in an assisted living residence or nursing home: private payment or Medicaid. Private payment is just what the phrase states—paying for the nursing home from the resident’s private funds, the resident’s assets and income.
A nursing home in New Jersey costs about $10,000 to $12,00 a month. An assisted living residence in New Jersey costs between $5,000 and $7,500 a month, depending upon the level of care that the resident needs. Most people could not afford to pay privately for long-term care for very long.
Medicaid is a government health insurance program for needy individuals. Unlike most health insurance programs, Medicaid will pay for long-term care costs. In order to qualify for Medicaid, the applicant must have very limited assets—typically less than $4,000 or $2,000 in assets, depending upon the program of Medicaid for which the applicant is seeking to qualify—and income insufficient to pay for the cost of his care.
If an applicant for Medicaid benefits is married, his spouse who is not residing in the nursing home can retain certain assets. In Medicaid parlance, the well-spouse is called the “community spouse.” The spouse in the nursing home is called the “institutionalized spouse.”
Assume that Mr. Smith enters a nursing home. The nursing home costs $12,000 a month for those residents who are privately paying the facility. Mrs. Smith is in good health and resides at home. The Smiths own a home worth $350,000, an automobile, and cash/cash equivalent assets of $300,000.
Mr. Smith receives income of $3,500 a month from Social Security and a pension he receives from his former employer. Mrs. Smith receives $1,000 a month from Social Security; accordingly, Mr. and Mrs. Smith have combined, fixed monthly income of $4,500. The couple’s shelter expenses (real estate taxes, utilities, property insurance, etc.) are $1,600 a month. The couple’s non-shelter expenses (medical expenses, food, clothing, travel) are $2,300 a month; accordingly, Mr. and Mrs. Smith have aggregate monthly expenses of $3,900, leaving a monthly surplus from their income of $600.
Mr. and Mrs. Smith want Mr. Smith to qualify for Medicaid benefits to pay for the cost of his care. The Medicaid program will permit Mr. Smith to retain no more than $4,000 before he can qualify for Medicaid. Mrs. Smith can retain the home and the automobile, both of which are non-countable assets, and a certain amount of the countable assets.
The amount of the countable assets that Mrs. Smith can retain is dependent upon the amount of countable assets that the couple had when Mr. Smith entered the nursing home. Because the Smiths had $300,000 in countable assets (cash/cash equivalents) when Mr. Smith entered the nursing home, Mrs. Smith can retain the maximum amount of countable assets that the Medicaid program permits a community spouse to retain, which is approximately $115,000.
If the Smiths only had $200,000 in cash, Mrs. Smith would only be permitting to retain $100,000. If the Smith had $50,000, Mrs. Smith could retain $25,000, and if the Smiths had $25,000, Mrs. Smith could retain the minimum amount of countable assets, which is about $23,000.
The Medicaid program also permits Mrs. Smith to retain a certain amount of Mr. Smith income. I will discuss the methodology for calculating Mrs. Smith’s income allowance next week, as the calculation of the income allowance is a bit involved.