Twin Cities Business, Personal Finance, October
2006, By Jeff Dekko
It’s one of those painful, “don’t make me deal
with this” issues that eventually confronts
most of us: Mom or Dad’s health is failing,
and she or he needs nursing home care. It’s
an issue that especially confronts baby boomers,
who now look out for their aging parents while
still raising their own families.
Meet Randy Boggio.
Boggio is a partner in the Bloomington law firm
of Garvey & Boggio, which specializes in
a relatively arcane field called “elder law.”
Unlike estate-planning law, which deals primarily
with the establishment of trusts, wills, and
the legal aspects of other instruments for passing
wealth from one generation to another, Boggio’s
practice also extends to legal questions surrounding
nursing home care.
“Elder law tends to be a crisis-oriented practice,”
Boggio says. “Typically, it’s the children coming
in with a parent who is showing signs of needing
nursing care, or the spouse has been told, ‘You
can’t take care of your husband or your wife
any longer.’”
Lately, his clients have new challenges to
contend with. As of last February, the new Federal
Deficit Reduction Act has significantly tightened
the eligibility requirements for medical assistance
through Medicaid. Specifically, it takes a much
stricter stance on the amount of time that must
elapse after a person has transferred assets—in
the form of gifts to family members, for instance—before
that person is eligible to receive assistance
from Medicaid, which in Minnesota is administered
through the state’s Medical Assistance program.
“Medical Assistance rules and regulations
become more restrictive each year,” Boggio says.
Effective estate planning or disability planning
should not include reliance on Medical Assistance
if at all possible.”
››› First, understand that the elderly
in the United States are eligible for Medicare
no matter what their income. That’s
a federally funded entitlement program to help
pay the health care expenses of those over the
age of 65. Medicare covers some care in a nursing
home, but only up to a limited dollar amount,
only after a three-day hospital stay, and for
a maximum of only 100 days.
Then there’s Medicaid, alias Medical Assistance.
This is a need-based welfare program, for which
an individual has to meet certain asset and
income limits.
Boggio’s job is to help the elderly and their
families deal with the need for and costs of
nursing home care. Full-time nursing home care
now costs about $5,000 a month in the Twin Cities
area, and about $4,000 a month outside the metropolitan
area, he says.
While, “a nursing home is not designed to
sap a couple’s life savings,” Boggio says, “it
can deplete those savings in a relatively short
period of time, potentially putting a heavy
burden on their children, especially if they
want to avoid tapping into Medical Assistance.”
For many people, though, Medical Assistance
will be unavoidable. When that’s the case, Boggio
says, the first priority in protecting some
of those personal savings is to look at the
exempt expenses allowed for a spouse under the
Medical Assistance guidelines. Two exempt items
are the couple’s home and a car. Given that,
Boggio urges his elderly clients to use excess
assets to pay down—or pay off—any remaining
mortgage on the house. Likewise, it’s a good
time to get a new roof and do other major home
maintenance and repairs that will be needed
in the relatively near term. Need a new car?
Buy one now, Boggio says—and get an extended
warranty. How about covering your burial and
funeral home expenses? Those, too, are exempt,
so use some of your assets there.
The new federal law extends the “look-back
period” that’s used to tally an individual’s
assets and determine when that person is eligible
for Medical Assistance. Rather than counting
as existing assets anything that the person
has transferred to others within the past three
years, Medical Assistance now looks back five
years and requires that people report any gifting
or transfer of assets within that period. The
value of those assets, divided by an average
current nursing-home cost of $4,400 per month,
will determine the number of months that person
must wait to receive Medical Assistance.
››› A Quick Example: Say your
father gave your nephew $44,000 for college
four years ago. That gift could delay your father’s
eligibility for Medical Assistance by 11 months
from the date of his application. Given that
delay, who will pay for care, and how? Those
questions can add to the “crisis” nature of
Boggio’s practice. Before a financial crisis
develops, he says:
››› Consider long-term care
insurance, if the possibility of nursing home
expense is a concern in your family—and do so
before the need for nursing-home care becomes
evident;
››› Begin any gifting program
and restructuring of your assets well before
the possibility of a nursing home enters the
picture;
››› Make sure all the necessary
documents are in place in good time, too: your
will; your power of attorney, which designates
the person authorized to handle your financial
affairs; and a health care declaration, which
provides instructions as to your care should
you be unable to express your wishes.
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