Many people mistakenly believe their estate planning is complete once they have created a Last Will and Testament (will). The truth is that many additional documents and factors need to be considered in a comprehensive estate plan, including the intersection with government healthcare benefits such as Medicare. Contact the experienced estate planning legal team at The Law Office of Jason Carr to learn about the connection between Medicare and estate planning and how we can assist you with creating a holistic estate plan that creates a secure future for you and your loved ones. Call our dedicated estate planning attorneys today at (214) 800-2366 to schedule a free consultation.
What Are Government Healthcare Benefits?
Government healthcare benefits provide coverage for healthcare that is partially or fully funded by state or federal governments. Two key government healthcare programs apply to seniors, Medicare and Medicaid.
Medicare is a federally funded health care plan for anyone over 65 who has worked for ten years or more and paid Medicare taxes. Medicare is also available to disabled people and those on dialysis at any age. Medicare eligibility is not income-based, and Medicare recipients are responsible for co-pays and deductibles that apply to their coverage.
Medicare coverage is focused on short-term healthcare and is provided in four parts:
- Part A – A type of hospital insurance that covers hospital stays and limited skilled nursing care.
- Part B – A type of medical coverage that covers doctor visits, preventative health care, and medical equipment.
- Part C – Also called the Medicare Advantage Program, this plan provides coverage through private health insurers for services not covered by Medicare Parts A and B.
- Part D – A prescription drug plan.
Medicaid is a healthcare plan jointly funded by state and federal governments. It is only available to low-income individuals and families. Medicaid is particularly relevant to the elderly as it is one of the most common ways their long-term care costs are paid.
Considering Short-Term Health Care in Your Estate Plan
Most people face reduced income due to retirement or semi-retirement sometime after age 65. This is also when the likelihood of them requiring healthcare increases. Consequently, every individual needs to have a plan for how they will pay for their healthcare as they age.
Although almost all individuals become eligible for Medicare when they reach age 65, many do not apply for coverage immediately at that time, particularly if they are receiving private health insurance coverage through their employer or their spouse’s employer. However, late enrollment penalties can result in higher premiums in the long run.
- Part A – A person who does not apply for Medicare Part A as soon as they become eligible has to pay a higher premium for a set number of years. This premium is calculated according to how many years the individual delayed their application.
- Part B – Failing to apply as soon as an individual becomes eligible results in a penalty being applied to the premium, which is calculated as a percentage of the total premium and increases according to the number of years the application was delayed. Any late enrollment penalty applied to Part B coverage remains for the life of the plan.
- Part D – A late enrollment penalty applies if the individual does not apply for Medicare Part D or another prescription plan within 63 days of their initial enrollment.
It is also important to be aware that applications for Medicare coverage are only accepted during a specific Medicare enrollment period. If a person misses the enrollment period, they will have to wait until the enrollment period in the following year, resulting in a further delay of their application and additional late enrollment penalties. Therefore, combining Medicare and estate planning is something that should be done well in advance of reaching the eligibility age. Contact our dedicated legal team at the The Law Office of Jason Carr today to discuss your specific estate planning questions and needs, and how you can maximize the benefits of Medicare by incorporating it into your estate planning.
Considering Long-Term Health Care in Your Estate Plan
While Medicare is useful for obtaining short-term healthcare at a reduced rate after age 65, it does not provide adequate coverage for long-term care. For example, Part A Medicare only covers up to 100 days in a skilled nursing facility, conditional upon the patient having stayed at least three days in the hospital beforehand. Medicaid, on the other hand, covers long-term care for an unlimited period for eligible recipients.
According to the United States Department of Health and Human Services, when a person turns 65, they have almost a 70 percent chance of requiring long-term care services at some point during the remainder of their life. Twenty percent of these people will need this type of care for more than five years. Therefore, it is essential to consider how you will pay for long-term healthcare as part of your estate plan.
The average annual cost of a shared room in a nursing home in Texas is $61,503, according to the American Council on Aging. Given the high cost of long-term care in Texas and across the United States, Medicaid is critical in helping individuals obtain the care they need in their senior years while relieving the burden of care from their families. Statistics gathered by the Kaiser Family Foundation indicate that Medicaid is the primary payer for nursing home care in the United States, with 61 percent of total nursing facility residents being paid for by Medicaid in Texas.
However, Medicaid eligibility is governed by a complex set of rules, and individuals must carefully plan how they can work toward becoming eligible for the program before they require long-term care. In Texas, a single applicant is permitted to have up to $2,000 in “countable” assets to be eligible for nursing home Medicaid. A person’s home is considered “exempt” from this asset calculation. An individual or family’s income must also fall below the limit to be eligible.
Medicaid applies a “look back rule” to all applications. This is a period of time (60 days in Texas) in which Medicaid will assess all past asset transfers to determine eligibility for the program. Most estate planning strategies that involve establishing eligibility for Medicaid violate the look-back rules by “spending down” a person’s assets through gifting or spending on personal purchases. While these strategies help establish Medicaid eligibility, they must be completed several years before the intended date of Medicaid application.
Contact a Texas Estate Planning Attorney to Discuss How You Can Include Medicare Benefits Into Your Estate Plan
Whether you are already in your senior years or planning toward them, you should consider how you will pay for your healthcare as you age. Government health benefits, including Medicare and Medicaid, are essential to a comprehensive estate plan that provides for your short- and long-term healthcare needs and avoids late enrollment penalties. Contact the experienced estate planning attorning at The Law Office of Jason Carr to discuss your Medicare and estate planning questions by calling (214) 800-2366 today.