Hanlon Niemann Blog | A Freehold, New Jersey Law Firm

Fredrick P. Niemann, Esq., NJ Medicaid Attorney

Mary and Joe own their home and have $150,000 in savings.  They have wills leaving everything to each other and then alternatively to their children, but they have done nothing to address their long term care needs.  Joe is now about to enter a nursing home and Mary is faced with spending down to $75,000 and losing Joe’s income before he will be eligible for Medicaid.  A classic crisis planning case.  Does Mary have any options?

Actually, yes.   While she will have to spend down there are ways to spend that will be more beneficial for Mary.  Let’s go through a list of some of them.  At the top of the list is setting up an irrevocable burial fund to pay for both of their funerals.  Better to do that now.  Otherwise she’ll have to take that expense out of what Medicaid says she can keep.  Other strategies focus on exempt assets and expenditures on exempt resources.  Of the $75,000 that she has to spend down she could fix up the house.  That might include replacing an old cooling or heating system, installing new windows and/or siding and remodeling the interior.  If she makes improvements that enhance the value of the home should she decide to sell that will result in more money for her to live on.

How about her car?  Mary has a 10 year old car.  It is better for her to purchase a new car as part of the spend down.  Or perhaps she has a car loan that she is paying off over time.  Paying it off before applying for Medicaid may be the better alternative.  That applies for other debt, such as credit cards or other installment loans.  Finally, Mary ought to look at anticipated expenses.  For example, if she or Joe needs dental work now may be the time to do it.

Some of the spend down will need to go to the nursing home to pay for the cost of care at its private pay rate so it is important to determine what amount will be necessary to get Joe into a quality facility.  Knowing that, they can then work backwards to determine what they have left to spend on the other items.  Additionally, if Joe is not yet in the hospital or nursing home it may be possible for Mary to keep more than $75.

A word of caution, however.  One size does not fit all.  What is best for one person may not be right for another.  Medicaid rules are very complicated and quite technical.  Before taking any action it is best to consult with an elder law attorney well versed in Medicaid law.  But, if done properly, Mary can preserve more than the 50% of assets that Medicaid laws say she can keep.  This is especially important, given the possibility that Mary may outlive Joe by 5 or 10 years or more.

If you have any questions concerning a Medicaid matter, contact Fredrick P. Niemann, Esq. at 732-863-9900, or fniemann@hnlawfirm.com.  He is happy to answer your inquiries.

A U.S. Census Bureau report yesterday said the number of citizens age 65 and older will more than double their current number from 38.7 million to 88.5 million in 2050.

American residents who are 85 and older will meanwhile triple in number from 5.4 million to 19 million by mid-century, the federal agency projects. A shrinking of the working-age population (i.e. those 18 to 64) is expected to occur along with the enlargement of the older population; working-age residents are expected to be 57 percent of all residents in 2050, down from 63 percent now.

The Census also projects the overall population of the U.S. will grow from roughly 305 million people today to 439 million in 2050.

America’s steep aging has signified to many policy analysts a need to reduce the cost of entitlement programs, particularly Social Security and Medicare.

“This certainly makes entitlement reform more urgent,” Michael Tanner, a senior fellow at the D.C.-based Cato Institute, told The Bulletin, noting entitlement spending could grow to become one third of gross domestic product by mid-century. “That’s not economically sustainable.”

Other observers, like Brookings Institution economist Gary Burtless, are less apprehensive.

“The situation for Social Security is not terribly dire,” he said. He said the higher pension benefits other rich western governments spend on their aging populations are important to consider for perspective. He also said these other countries face larger increases in their numbers of seniors.

Dr. Burtless said Medicare and Medicaid, which provide healthcare to the elderly and the poor, present more pressing concerns but not primarily because of aging but because of the advances in medicine that have caused costs to go up. In 1960, he said, personal healthcare expenditures made up 7 percent of personal spending overall.

That figure is 20.5 now and is expected to continue rising. Government currently pays 45 percent of Americans’ health expenses and that percentage is also projected to rise.

“That does represent a big problem,” he said.

Mr. Tanner said because the population is aging so rapidly, the constituency most wary of scaling back entitlement programs and instituting free-market reforms stands to gain political clout and make changes more difficult to implement.

“There’s always been a bias in favor of voting in favor of seniors’ benefits because seniors vote and young people don’t,” he said.

One political development Mr. Tanner found telling was Republican presidential candidate John McCain’s refusal to back either a GOP proposal to cut Medicare reimbursements to doctors and hospitals or a Democratic measure to cut reimbursements to Medicare Advantage insurers.

Mr. Tanner said lawmakers are in a constant balancing act between efforts to fully reimburse the medical community for the care they provide and attempts to hold down spending. He said the government could resolve the matter by funding patients or insurers instead of each individual medical procedure.

The Census study also projects that racial minorities, making up about a third of the U.S. population today, will constitute a majority in 2042 and reach 54 percent of the population by mid-century, or 235.7 million out of 439 million total U.S. residents. The percentage of nonwhite U.S. children, meanwhile, will rise to 62 in 2050, up from 44 percent today.