Learn How To Retire: Individual Empowerment

By William Edy • October 4, 2009

Although some studies estimate that the number of American veterans will decline over the next 10 years, VA statistics also reflect that the number of veterans age 85 or older will triple over that same period.

This will create a strain on the increased need for custodial and assisted living health care, in addition to skilled care nursing care.

Medicaid contributes to the cost of skilled nursing home care, paying what the patient’s income cannot pay, assuming that the single person has assets or savings not exceeding $2,000.

Medicaid does not pay for assisted living and only in certain extremely limited areas, such as

Tax attorney Dale Krause, a well-known speaker on Medicaid and veterans planning, spoke last week at the National Network of Estate Planning Attorney’s Fall Collegium in

Krause quoted the Genworth Cost of Care Survey for 2009 indicating that the average monthly rate of a Medicare certified home health aide was $3,527.33, while a private one-bedroom unit in an assisted living facility was $2,825.25 a month, while a semi-private room in a skilled care nursing home facility approaches $6,000 a month, and often exceeds that amount in our area.

While some may never need skilled care where a nurse would be on duty 24 hours a day, many will need what is considered help with their activities of daily living, which are “eating,” which is defined as manipulating utensils and eating independently; “bathing,” which is defined as getting in and out of a bathtub or shower and washing; “dressing,” which is defined as being able to manipulate buttons and zippers while dressing; “continence,” which is defined as maintaining bladder and bowel control; “transferring,” which is defined as moving independently from one place to another, from the bed to the chair or sofa; and “toileting,” which is defined as using the toilet without assistance.

These six ADLs often define disability for long-term care insurance purposes. Help with one of these activities may result from old age, but help with two or more may indicate the need for custodial care, even if full-time skilled nursing care is not prescribed.

With the cost of long-term care increasing while client’s investment portfolios are diminishing, seniors are looking for additional funding sources for long-term care. Although long-term care insurance is ideal, it is usually unaffordable and unavailable because of expense and preexisting conditions. Waiting to apply for long-term insurance until an illness appears is like waiting to obtain fire insurance until your house starts burning.

While Medicaid is the largest payor of long-term care services in a nursing home, most government programs provide little or no funding for services provided in the home or assisted living facility. One exception is the Veterans Administration benefits offered through the Aid and Attendance program, or A&A.

In order for a veteran to qualify for the A&A benefit, he or she must have served at least 90 days of active military service, with at least one day being during wartime, but not necessarily in a war zone, must have received any discharge other than dishonorable, must be totally disabled, have nominal assets and low monthly income, and, most important, be in need of daily aid and assistance of another person to avoid the everyday hazards of life.

Their disability does not have to be service connected, and is presumed if the veteran is in a nursing home for long-term care because of disability, receiving Social Security disability benefits, is unemployable because of disability expected to last indefinitely, or is suffering from a disease that renders them totally disabled as determined by the secretary of the VA.

To receive A&A, the veteran may only retain nominal assets. Most literature puts this limit at $80,000, but Krause states a single applicant should retain no more than $30,000, although there is actually no set limit according to the official VA Web site.

The applicant should retain no more than enough to pay his or her un-reimbursed medical expenses, including medical bills, durable medical expenses, medical transportation, invoices from home health care agencies and assisted living facilities.

If the single veteran, for example, can show that his or her monthly un-reimbursed medical expenses exceeds his or her income from Social Security and pension, the veteran will be eligible for the maximum monthly A&A benefit of $1,644. Un-reimbursed means expenses not covered by Medicare or other health insurance.

Krause discussed the case of a widowed 76-year-old man suffering from Parkinson’s disease, whose doctor indicated he could live for seven to 10 years with help with his ADLs in an assisted living facility.

With his assisted living facility charging $3,800, together with his part B premium of $96.50 and prescription drug costs of $154.60, he had un-reimbursed medical expenses of $4,051. His only other expenses were $110 for cable and phone, which are not medical expenses.

His income was $1,500, resulting in a shortfall of $2,661. If he applied all of his $185,000 savings to the shortfall he would not have sufficient money to meet his expenses for his lifetime.

Krause’s plan was to have the veteran hire a elder law attorney for $10,000, purchase a prepaid funeral plan for $7,500, retain $30,000 in his savings account jointly titled with his daughter to avoid probate, and purchase an immediate annuity for $137,500, certainly not a Medicaid compliant annuity, which would pay him $1,017 a month for 178 months, for a total payout of $181,028.

Because his annuity payment increased his monthly income to $2,517, which is $1,534 less than his un-reimbursed medical expenses of $4,051, he was entitled to receive his A&A benefit of $1,644, enough to cover his full monthly expenses of $4,161.

Next week I will discuss how much of his savings was used to meet his expenses and what happened when in four years he needed to apply for Medicaid for skilled care nursing home and how this non-Medicaid compliant annuity was handled by his elder law attorney, as well as how much his daughter received at his death.

- William Edy is a Certified Elder Law Attorney and Certified Financial Planner. You may ask him for his free booklet on Medicaid planning by calling 772-5800 or online at CapeElderLaw@aol.com. He may be contacted on-line for article ideas and questions. Since e-mail is not secured, do not send confidential information by e-mail. This article should not be a substitute for advice from your own attorney.

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