The easiest way to pay for nursing home care for an elderly or disabled family member is also the hardest. You write the monthly check. It hurts because the average yearly cost is now $70,128.
Before writing a check, it makes sense to talk with a knowledgeable attorney or accountant so that your family does not overlook tax deductions or available benefits. For example, if you pay more than 50% of the support for a relative who meets certain gross income guidelines, then you may claim the relative as a dependent on your own federal tax return. You might also qualify for the dependent care credit which is available for a dependent parent who needs full time attention.
The I.R.S. also permits a tax deduction for qualified long term care services. Many of the costs incurred in a nursing home can qualify for the medical expense deduction under a proper plan as long as it is set up by a licensed healthcare practitioner.
Medical expenses can be claimed as itemized deductions, so long as they exceed 7.5% of adjusted gross income. Qualified health insurance premiums, long term care service and other eligible medical expenses can be added together to meet this cutoff. If you pay nursing home costs for a parent or disabled family member, it is important to consider this deduction.
Many people turn to Medicaid to write the check for nursing home care. The program is jointly funded by the states and the U.S. government. The first hurdle is that your family member must have a medical reason to be in a nursing home. It is not a housing program. The next hurdles are the income and asset guidelines. The single person guidelines for Medicaid limit assets to $2,000 in the bank, possibly a car, some personal property and a prepaid funeral account. The rules are more generous for spouses. A spouse can keep approximately $100,000 in assets and the family home. If any assets were given away within five years prior to applying, those transfers may block your family member from eligibility. The guidelines do vary from state to state.
Considering that some government statistics predict that 50% of U.S. population will spend at least some time in a nursing home, it is a good idea to consider long term care insurance. Our average stay is 11 months. Long term care insurance policies have many different features, including daily benefits, elimination period, inflation riders and benefit length limits. Two good starting points are to be sure that any policy you purchase is tax qualified and that the insurance company is sound. Since long term care insurance is a new product and the companies have had limited claims losses, it tends to be reasonably priced.
The United States Veterans Administration is another possible source of nursing home care. The U.S. Veterans Administration maintains about 115 nursing care facilities. That is a very small number to house all of our veterans. They have about 300 beds each and there is some availability for spouses of veterans, surviving spouses and certain eligible parents, such as Gold Star mothers.
Medicare is another checkbook but its funds are very limited. It doesn’t come out until a patient spends three days in a hospital and is prescribed to a nursing home by a doctor for “skilled nursing care.” After 21 days you have to write checks for a significant co-pay of $128 per day. A medi-gap policy can cover this but your own checkbook comes out again for full pay after 100 days.
It pays to plan and consult ahead and long term care insurance may be a bargain in the long run.
Joseph M. Hoffmann, Esq. is an attorney in Newton, who helps clients with trusts, estate planning, Wills and related transactions.