Some people struggling to figure out how to pay for health care during their later years have a concerning solution: They’re asking financial advisors to help make them poor so they can qualify for Medicaid.
A new Nationwide Financial advisor survey released last week found that half of advisors say they have clients asking about giving all their money to their children in order to qualify for government assistance in paying for long-term care.
According to the Harris Interactive survey of some 500 financial advisors, 42 percent also say their clients think of “Medicaid planning” as a way to preserve their children’s inheritance.
“Medicaid should not be a plan, but used in instances where an unexpected and financially devastating illness of one person threatens to impoverish their still healthy spouse,” says John Carter, president of distribution and sales for Nationwide Financial. “Medicaid was never intended to supplement the middle or affluent classes. Medicaid was meant to help care for the poor.”
Roughly half of Americans who need long-term care services depend on Medicaid to pay for their long-term care expenses. Most in this program are our nation’s impoverished, including those who eventually exhausted their assets leaving Medicaid as a last resort. However, others purposely gave away their assets to their heirs in order to qualify for the program and avoid paying their own long term care expenses.
Nationwide warns that while “Medicaid planning” is becoming a more often used tactic, there are a host of concerns associated with the plan. They include:
• While Medicaid may pay the bill for nursing home care, you may not get to live where you wish. Nursing homes are not required to accept new patients who are on Medicaid.
• Medicaid often uses nursing home care as the only choice. Community based services such as assisted living, home health care or adult day care are not a typical option for those relying on Medicaid.
• Medicaid patients do not get private rooms and if they are unhappy with the facility, they may have limited ability to change situations.
• Consequences for spouse. Your spouse may not have the income needed to maintain his or her lifestyle.
“Many of our advisors tell us the most important aspect to their clients when planning for long term care is maintaining control,” Carter says. “People who resort to repositioning or giving away their money often find they sacrifice control when having to ask for money that used to be theirs. They also give up control when protecting an inheritance for their children outweighs comfort in their final days.”
Advisors say only 15 percent of their clients understand the potential costs of long term care well and over a third (35 percent) say their clients understand the costs “not at all well.” People living to age 65 have a 70 percent chance of needing some type of long term care in their lifetime. The average cost per year for a nursing home is projected to be $265,000 by 2030—and that’s not even for a private room.
But there are solutions that don’t include giving away assets to qualify for Medicaid. Experts suggest buying long-term care insurance, building a plan early for later life by estimating costs based on clients’ health risk and lifestyle.