The courts recently relaxed a long-term care retirement planning regulation that should make it easier for couples to use Medicaid to pay for nursing home care for one without impoverishing the healthier person.
State and federal regulations severely limit the amount of savings a couple can have if one of them needs Medicaid assistance to pay for a nursing home. In Hughes v. McCarthy, an Ohio couple faced this problem when the wife entered a nursing home in 2005. The couple was able to pay for her care until 2009, when they applied for Medicaid assistance. Shortly before making the application, the husband took $175,000 from his IRA and bought an immediate annuity, reducing his assets by that amount, but guaranteeing that he would have enough on which to live.
The Ohio Medicaid agency called this an improper transfer of funds, claiming that his IRA was community property and saying the nursing home should have first dibs on that money. The couple appealed and ultimately the 6th Circuit U.S. Court of Appeals agreed that the husband could use the annuity purchased with his IRA to support himself without jeopardizing his wife's right to assistance from Medicaid.
Following Medicaid's complex rules and regulations is difficult and made even more complex by the inconsistent mix of state and federal rules. With long-term nursing home care costing about $75,000 per year on average for a semiprivate room, according to U.S. Department of Health and Human Services, the loosening of this regulation could make a big difference in how couples living in retirement pay for long-term care.
If you fear that you may have to ultimately rely on Medicaid to pay for long-term care, now -- while you're healthy enough not to need assistance -- is the time to consider how to manage assets for when the time comes.