Following is a thorough look at both Medicare and Medicaid, and long-term care insurance options.

Government-Funded Long Term Care Programs

Medicare pays limited health care costs for people who are over 65 years old or who are disabled. Many people mistakenly believe Medicare will pay for their long-term care. In fact, Medicare covers few long-term care services.

Medicare plays a small role in funding long-term care because of strict eligibility and coverage limits. To qualify for Medicare, patients must meet the following conditions or requirements:

• Medicare coverage for patients in skilled nursing facilities is limited to 100 days - 20 days of full coverage, plus an additional 80 days of partial or co-insurance coverage. In days 21-100, patients (in 2001) pay $99 per day to continue receiving Medicare payments.
• After 100 days, when Medicare runs out completely, all too often nursing home residents and their families find that care must be financed with personal savings or assets until the resident becomes poor enough to qualify for state assistance through the Medicaid program.
• For Medicare to cover skilled nursing care, patients must meet all of the following five conditions:
  • the patient's condition requires daily skilled care, not merely custodial or basic care;
  • the patient has been hospitalized at least three days in a row;
  • the patient is admitted to a skilled nursing facility within 30 days of leaving the hospital;
  • the patient's care in the skilled nursing facility is for a condition that was treated in the hospital, and
  • a physician certified that the patient needs and has received skilled nursing services daily since his or her admission to the hospital.

Many consumers enter nursing homes paying for their own care costs. Yet, without the protection of long-term care insurance, most will quickly spend down their available funds and be forced to rely on Medicaid to pay for their care. About 70 percent of nursing home residents in Michigan depend on Medicaid to pay for their care.

Applying for Medicaid can be a time-consuming and confusing process. As soon as you know that you or a loved one is likely to require skilled nursing care for more than 30 continuous days, you can begin the application process.

The first step is to go to the Michigan Family Independence Agency (FIA) office in your community to find out if you or your loved one are eligible for Medicaid assistance with nursing home bills. (These offices used to be known as DSS or Department of Social Services. In some communities the office may still be better known as DSS.) You can find the phone number for the statewide office of the Family Independence Agency in Appendix C of this guide.

At the FIA office, you will receive an application form and complete an initial asset assessment to determine your (or your loved one's) eligibility for assistance. FIA can mail you this form if you'd like to fill it out in advance. Eligibility is determined based on the assets and income of the person who needs nursing home care.

Applicants will be ruled ineligible for Medicaid assistance if they have assets greater than $2,000 at the time they enter the nursing home. In that event, applicants must pay for their care out of their assets until such time as they spend their "countable assets" down to $2,000 or less.

This may sound harsh, but remember that the Medicaid system was never designed to be the nursing home insurance plan for middle-class families. It is meant to provide nursing home care for persons who truly are unable to pay for their own care.

There are some assets valued at more than $2,000 that Medicaid applicants are allowed to keep without jeopardizing their Medicaid eligibility. For instance, applicants may usually keep one home and one car. These holdings are not counted among an applicant's assets. This rule protects families of nursing home residents from having to become impoverished to pay for their loved one's care.

Following is a list of some of the kinds of assets that DO count toward the $2,000 asset limit:

1. Money in the form of:
   • Cash, savings and checking accounts
   • Credit union share and draft accounts
   • Certificates of Deposit (CDs)
   • Savings Bonds
   • Individual retirement accounts (IRAs) and Keogh plans
   • Nursing home trust funds
   • Prepaid funeral contracts which can be canceled
   • Trusts, depending on the terms of the trusts
   • Annuities
2. Equity in:
   • Real estate other than your home
   • More than one car
   • Boats or recreational vehicles
   • Stocks, bonds and mutual funds
   • Land contracts or mortgages held on real estate sold.

Assets that are NOT counted toward the $2,000 asset limit:

• A home in Michigan
• Personal belongings and household goods
• One car
• Income-producing real estate. The annual income after expenses must equal 6% or more of your equity.
• Burial spaces and certain related items for you, your spouse and members of your immediate family.
• Up to $1,500 designated as a burial fund for you or your spouse.
• Irrevocable funeral contract.
• Value of life insurance (if face value is $1,500 or less)
• Assets which you and your spouse do not have the legal right to use or dispose of.
• Assets you and your spouse have not been able to sell (the asset must have been for sale at a fair market value for at least 30 days).

In the event of jointly held assets, FIA will assume that each person owns an equal share of the asset. In the event of joint cash assets, FIA will count the entire amount as belonging to the applicant unless it can be proven that some of the money belongs to other persons.

Aside from assets, FIA also will look at income. There is no income limit for spouses of nursing home residents - but there are limits on the amount of income nursing home residents themselves may receive and keep. Examples of the kinds of income counted toward Medicaid eligibility determination include Social Security benefits, pensions and Veterans benefits.

The FIA office will consider the amount of income the applicant has each month in determining what percentage of nursing home costs that Medicaid will pay for and what percentage the applicant will be expected to pay for out of his or her own income. Most Medicaid patients are assigned a co-pay amount that will absorb most of their monthly income. Residents will be allowed to keep about $60 per month out of their income for personal needs. Residents who are married or have dependent children at home also may be able to keep a certain amount or percentage of their income to provide support to their family. Residents may be allowed to keep back income earmarked for paying certain types of medical costs and insurance coverage premiums. Income limits and rules on exemptions are subject to change each year, so the best thing to do is discuss these issues fully with FIA staff during your application process.

Income and asset eligibility rules are slightly different for married and single individuals. Rules are in place to protect a certain amount of assets for spouses of nursing home residents seeking Medicaid assistance.

For example, in counting assets, FIA will allow a "protected spousal amount" (PSA). In 2001 the PSA is 50 percent of a married couple's total assets (not to exceed $87,000 and not to be less than $17,400.) Again, these numbers are subject to change each year, so be sure to discuss the allowable PSA with your FIA office.

When you go to the FIA office to apply for Medicaid, you will be asked about many things including your income and assets, your age, your medical expenses, your marital status, what forms of insurance you have, and information about your spouse's assets and income.

You will need proof of your income and assets and proof of your medical bills. Documents to bring with you to your FIA appointment include:

• Bank books or statements, including joint accounts
• Pension checks (stubs or proof of usual dollar amount)
• Social Security Checks
• Real estate value (aside from your home)
• Recent medical bills

The point of the initial asset assessment is to determine how much assistance nursing home residents truly need from Medicaid and to make sure residents pay whatever percentage of their own medical costs that they are able to pay.

Because many people try to give away or divest their assets to escape paying their share of nursing home costs, FIA will investigate any recent transfers of assets you have made. FIA will review any transfer of assets you have made in the last 36 months and any transfers into trusts in the last 60 months.

FIA is supposed to determine your eligibility in less than 45 days (or less than 60 if you are disabled but not elderly). In some parts of the state, Medicaid fails to meet these goals and determining your eligibility can take much longer.

Nursing homes often will work with you and give you a placement before your eligibility has been determined, knowing that when the determination is finally made, it will be retroactive (meaning Medicaid will pay its share of the cost of services you have already received).

It is important for families to realize, however, that the patient co-pay amount determined by Medicaid will also be retroactive. As a result, the resident (or resident's guardian) will get a lump sum bill for the cumulative co-pay amount for the months of service already received. This first co-pay bill can cause a financial imposition for families that haven't been setting aside the appropriate portion of the residents' monthly income (i.e. social security) to prepare for this bill.

Nursing homes are not legally required to continue serving residents who regularly fail to pay the patient co-pay amount set by Medicaid. Letting the co-pay amounts accumulate and build up until they are unmanageable is unwise and can result in an involuntary discharge from the nursing home.

This type of discharge rarely happens, because most nursing homes are willing to work out payment plans if the resident or guardian is sincerely willing to try.