If you live in Massachusetts, you probably heard that assisted living and long-term care needs are expensive in the state. That is true. According to Genworth’s cost of living study, the average monthly assisted living and nursing home cost in Massachusetts is $5,599 and $11,710, respectively. You may think you will just let MassHealth pay for your long-term care needs. If you do that, you are setting yourself and your family up for potential financial disaster (in our opinion). In this article, we discuss the #1 reason why Massachusetts residents need a traditional long-term care insurance policy.
We have discussed the need for long-term care ad nauseam. We won’t discuss that again here. However, to put it simply, you and/or your spouse will most likely need some type of long-term care assistance in your future.
Oh, everyone in your family lives a long life and have never been in a home, you say? All bets are off now. You can’t predict your future. Just because your parents or other relatives never needed long-term care services doesn’t mean you won’t.
What’s The #1 Reason?
The #1 reason: you can lose your home. How, you ask? We will get to that further. But, it is a fact and common. If you were planning on having the family home for a while, you can plan on losing it if you don’t have a traditional long-term care insurance policy.
Before we go into details on why, let’s recap on the ways to pay for your long-term care.
4 Ways To Pay For Your Long-Term Care Needs
There are 4 ways to pay for your long-term care needs. You can:
In other words, do nothing for planning and if you need long-term care, spend down your income and the assets you worked so long and hard for. Unless you are rich, you’ll ultimately become destitute and qualify for MassHealth. MassHealth will then call the shots on your health care needs. If this is what you want for yourself and loved ones, I wish you good luck.
Establish An Irrevocable Trust
A lawyer can help you establish this. Essentially the trust becomes a separate entity. In general terms, you would title your assets in the name of the trust. If you need long-term care services, MassHealth can’t touch them (because they don’t necessarily belong to you), and you would qualify for MassHealth. Yes, the drawback is MassHealth will call the shots on your health care needs. (They are paying the bills, right, so some person whom you never met, will determine your needs. Is that what you want?)
While a trust can prevent your assets from being used for long-term care, the trust is irrevocable, so once it’s set up, you lose control of the assets. We urge caution here and the consultation of a qualified attorney if this is how you want to proceed. Just like greedy insurance agents, there are lawyers who want to set up an irrevocable trust to set one up. Consult one who puts your best interest first.
Purchase An Asset-Long-Term Care Insurance Policy
These asset-long-term care insurance policies are becoming more and more popular as the “use-it-or-lose-it” stigma wears on traditional long-term care insurance policies. However, they leave Massachusetts residents with a glaring gap that we will discuss next.
Purchase A Traditional Long-Term Care Insurance Policy
While these are less common, they (in our opinion) provide the best protection of your assets. They still offer great benefits, even better than those offered by asset-long-term care insurance policies. If designed correctly, you don’t have that “use-it-or-lose-it” stigma as you think. We will discuss these policies next.
MassHealth Will Pay, But There Is A Catch
Let’s say you decide to either self-pay, establish a trust, or purchase an asset-long-term care insurance policy. Probably in all cases, even in the case of the asset-long-term care insurance policy, MassHealth will have to pay something.
Here is something many people do not realize: MassHealth is not a free service. Sure, they are paying for long-term care services now, but they want their money back! Anything they spend on you for your long-term care and custodial needs, they will want the money back.
How is that, you ask? From a process called Estate Recovery.
But, John, I won’t have anything left, you say. Actually, you will. While there are many assets that are not countable towards the MassHealth spend down process, these assets, such as your home, are now off limits. MassHealth will place a claim on your assets in your estate upon your death to pay back their services.
You did not know that? A lot of people don’t, until it is too late. Fortunately, there are ways to mitigate estate recovery, and we will discuss those soon. But first, we discuss the estate recovery process in more detail.
What Is Estate Recovery?
When a recipient of MassHealth long-term care services dies, MassHealth has the authority to make a claim on the deceased recipient’s assets and estate in an amount of the total paid out on the recipient’s behalf. It is a federal requirement that the MassHealth program does this so as to reduce the costs associated with the program.
A claim can be made to pay for:
- long-term care services
- prescription drugs
- hospital expenses
- anything associated with MassHealth paying
You are subject to estate recovery process if you are:
- age 55 or older at time of death, and
- received MassHealth benefits after 10/1/1993
So, that means YOU!
Here is the kicker: assets that were exempt (i.e., non-countable) for the MassHealth eligibility process are now considered non-exempt (they are COUNTABLE) for the estate recovery process. Assets include:
- your home
- household furniture
- bank accounts
- saving accounts
- your car
- your personal belongings (such as family heirlooms)
This means the value of your home can be used to pay for anything MassHealth paid on your behalf.
Moreover, here in Massachusetts, the spend down process includes the value of your home!
In other words, if you need long-term care services, MassHealth can force you to sell your home if certain requirements are met. Those proceeds are then used to pay for your long-term care needs.
There Is A Way To Stop This!
So, what you just read must have you down. Yes, in Massachusetts the value of your home can be used to pay for your long-term care needs on the front end. If it is not, then the state can make claim on your home to reimburse MassHealth for money paid on your behalf.
While many states keep the home off limits during the spend down process (and may require selling during the estate recovery process), in Massachusetts the home is part of the spend down process. That means you may have to sell your home in order to have MassHealth pay for your long-term care. You WON’T have to sell your home IF your home has less than $750,000 of home equity AND any of the following applies: (Be careful of the “AND.” If you don’t qualify for anything below, then homes with less than $750,000 of equity WILL have to be sold!)
♦you intend to return to the home
♦one or all of the following people live in your home:
- child under the age of 21
- disabled or blind child of any age
- child who cared for you for at least 2 years before you moved into a nursing home
- sibling who has an equity interest in the home
- dependent relative
♦you have a qualified long-term care insurance policy
The spend down process will include your home if these exceptions do not exist. Even if the spend down process excludes your home, Massachusetts can, and will, make claim of your home upon your death to pay for any long-term care services paid by MassHealth. (During the estate recovery process.)
Again, an exception exists if you have a qualified long-term care insurance policy. Your home won’t be subject to estate recovery.
Yes, A Long-Term Care Insurance Policy!
Do you see the theme here? In Massachusetts, you can avoid this mess, save your home, and many other valuables by purchasing a qualified long-term care insurance policy.
If you don’t believe us, here is the language written in the state’s legislature as summarized:
No claim for costs of a nursing facility or other long-term care services shall be made . . . if the individual receiving medical assistance was permanently institutionalized, had notified the division that the individual had no intention to return home and, on the date of admission to the nursing facility or other medical institution, had long-term care insurance that, when purchased, met the requirements of 211 CMR 65.00.
Here is a link to the verbiage.
Not just any long-term care insurance policy will work, though. The policy has to meet the state’s requirements as defined in 211 CMR 65.00. What are these requirements? We discuss them next.
What Is A Qualified Long-Term Care Insurance Policy In Massachusetts?
Here are the provisions which makes a long-term care insurance policy qualified in Massachusetts. The policy…
- benefit trigger is the insured’s inability to perform two or more ADLs due to loss of functional capacity or severe cognitive impairment.
- cannot condition receipt of any services on any standard of medical necessity (except medical services provided by licensed medical professionals).
- cannot condition benefits on a prior hospitalization or prior receipt of long-term care services.
- must be issued as guaranteed renewable or noncancelable.
- cannot condition receipt of benefits on a requirement that the insured must make “steady improvement” or have “recuperative potential” (or words of similar import).
- cannot include an elimination period of more than 365 days.
Additionally, the insurer must make available at the time of application an option for you to…
- add inflation-adjusted benefits.
- purchase a nonforfeiture benefit.
Before you go any further, those asset-long-term care insurance policies do not qualify under 211 CMR 65.00. Massachusetts residents need a traditional long-term care insurance policy that meets the requirements of 211 CMR 65.00.
We hope this article educated you on why Massachusetts residents need a traditional long-term care insurance policy. None of us want to lose our assets and especially our home to long-term care services. The good news is that Massachusetts residents have a way to mitigate this event through the purchase of a qualified long-term care insurance policy as defined in 211 CMR 65.00. Remember, even though they are useful, asset-long-term care insurance policies do not qualify.
If you don’t know where to start or what is even the right policy for your needs and budget, we can help. We have certified long-term care specialists on our staff who can customize and design a plan. We go through the all the steps and work with you to a final plan, only selecting the one that meets your goals, needs, protection, and budget.
Feel free to contact us or use the form below. We would be very happy to help you with this important coverage.