The easiest way to pay for nursing home care for an elderly or disabled family member is also the most difficult. You write the monthly check. It hurts because the average annual cost is now $70,128.
Before writing a check, it makes sense to talk to a knowledgeable attorney or accountant so your family doesn’t miss out on tax deductions or available benefits. For example, if you pay more than 50% of the support for a relative who meets certain gross income requirements, you can claim the relative as a dependent on your own federal tax return. You may also qualify for the dependent care credit that is available to a dependent parent who needs full-time care.
The IRS also allows a tax deduction for qualified long-term care services. Many of the costs incurred in a nursing home may qualify for the medical expense deduction under an appropriate plan, as long as it is established by a licensed health professional.
Medical expenses can be claimed as itemized deductions as 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 to meet this limit. If you pay nursing home costs for a disabled parent or family member, it’s important to consider this deduction.
Many people turn to Medicaid to write the check for nursing home care. The program is funded jointly by the states and the United States 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 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 assets were given away within the five years prior to applying, those transfers may block your family member’s eligibility. Guidelines vary from state to state.
Since some government statistics predict that 50% of the US population will spend at least some time in a nursing home, it’s 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 duration limits. Two good starting points are to make sure that any policy you buy is tax qualified and that the insurance company is solid. Since long-term care insurance is a new product and companies have had limited losses from claims, it tends to be reasonably priced.
The United States Veterans Administration is another possible source of nursing home care. The US 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 by a doctor to a nursing home for “skilled nursing care.” After 21 days, you must write checks for a significant copay of $128 per day. A medi-gap policy may cover this, but your own checkbook goes out for full payment again after 100 days.
It pays to plan and ask ahead and long-term care insurance can be a bargain in the long run.
José M. Hoffmann, Esq. is an attorney in Newton, helping clients with trusts, estate planning, wills, and related transactions.