Should You Use the Safety Net?

By Linda Anderson, CELA

When an elderly loved one is diagnosed with a chronic illness, it can bring a tremendous amount of uncertainty to your world. How will your loved one’s condition progress? Where will you find the needed care? How will you pay for it? I’ve watched thousands of people grapple with these questions.

Families need answers, and that’s one of the reasons I like the Life Care Planning approach so much. It is based on a set of assumptions that make it possible to plan for the unknowns in the long-term care journey. Life Care Planning teaches us that 1) what is happening to your loved one is predictable, and 2) the transitions between levels of care are predictable, which makes is possible to plan.

How to pay for care is one of the most important elements of that plan. Unless you’re independently wealthy, odds are good that your loved one will run out of money at some point. Odds are also good that you will be advised to look to to Medicaid, the nation’s safety net, to pay for care.

Some people chafe at this suggestion, wrongly believing that Medicaid is a welfare program exclusively for low-income people. It’s not. Federal Medicaid laws allow middle class and upper-middle class people to access Medicaid benefits.

Let’s say that your husband has dementia and will soon need care in a facility. You are healthy enough to live at home. If you spend down all your assets (and get rid of your home) to qualify your husband for Medicaid, where will you live? What kind of life will you have if your money is gone? How will you pay for your own long-term care in the future? Fortunately, Medicaid rules allow a healthy spouse to set aside assets for their own use if the planning is done in advance.

One of the biggest political hot potatoes involves Medicaid and single people. Is it okay for a single person to accelerate Medicaid eligibility so they can protect half of their estate? There are many good reasons why we might want to accelerate someone’s access to the safety net. Let’s say that a person who lives in a nursing home recovers enough to receive a lower level of care. If they’ve spent down all their assets to qualify for Medicaid, then they’re effectively broke. There’s no way to return them to a lower level of care that would require out-of-pocket spending because they have no money in their pocket. This makes them dependent on Medicaid, and Medicaid was never meant to be a complete solution for financing care.

When you do Medicaid planning, you’re doing the same kind of asset protection planning that high-net-worth people have always done to sidestep federal estate taxes and income tax. Accessing the safety net isn’t stealing. You’re not taking something away from somebody who really needs it. If your loved one has dementia and you don’t have money to pay for care, your loved one really needs the money. Your goal is to help your loved one live as well as possible in the least restrictive setting. Accessing the safety net at the right time can make that possible.

Linda Anderson is a Certified Elder Law Attorney and founder of Anderson Elder Law, a Life Care Planning Law Firm in Media, Pennsylvania.