Beware of This Financial Advice About Aging Parents

Have you ever heard this?
“Your dad paid taxes all his life. Let the government take care of him.  He should get rid of his assets so he’ll qualify”.
This may be considered “good” advice by some financial planners.  Here’s why I usually consider it terrible advice.
What the financial advisor is telling you or your aging parent with this suggestion is that it is a good idea for your aging parent to give away his assets or otherwise impoverish himself so he can qualify for Medicaid.  Medicaid is a state, county and federally funded health insurance program for the indigent.  The benefits are quite limited.  One state has already eliminated the program entirely for some of its citizens and  many other states are slashing Medicaid mercilessly.  The program is in trouble.
An impoverished elder who qualifies for Medicaid may have only one option for care when care is needed for the basics, such as bathing, dressing, and walking. That option is a nursing home.
Some counties have programs, such as In Home Supportive Services, which will provide limited home care services through paid caregivers or sometimes through a relative.  The care provided can enable a low income elder to remain at home rather than go into a nursing home.  However, with the severe  budget cuts going on in most states, these kinds of programs are either being cut back severely, or eliminated entirely.
They are indeed public benefits programs, first on the chopping block.  Don’t count on home care as a benefit if your aging loved one qualifies for Medicaid.
But what about Medicare, you ask?  Medicare has never paid for nursing home care for those who do not need skilled care by licensed nurses, physical or occupational therapists.  If Dad needs help only with bathing, dressing, eating or meal preparation, walking, getting out of the chair or bed, or using the bathroom, Medicare will not cover care in a nursing home.  Help with this so called “custodial care”  is not a covered service under Medicare, or other health insurance. (Long term care insurance is the only exception).
Even if your aging parent has surgery, or has a stroke and has to go to a nursing home (also called “rehabilitation facility”), Medicare coverage ends the minute he or she is stable and no longer in need of rehabilitation, regardless of the fact that Medicare allows a maximum benefit of 100 days of coverage in an nursing home.
The rehab time might be two or three weeks.  You may get a call from the administrator letting you know you have two days or maybe  a week to find another place for dear old Dad, as his Medicare is about to expire.  Dad can’t go home yet because he can’t be alone? Get out the checkbook.
You either pay out of pocket for that nursing home or if Dad qualifies for Medicaid, he may have to move to a facility that accepts Medicaid.  He will likely have a roommate or two in a Medicaid-paid room. Is that what you want for him, long term?
Intentional impoverishment to qualify for Medicaid makes perfect sense when there is a need for supervised long term care, there is a spouse still living in the family home, assets are limited and the family is working to maintain the best quality of life for both parents.  It makes sense when a parent has significant cognitive impairment, needs a nursing home and does not know or appreciate where he or she is being cared for due to the severity of his or her impairment.
It makes sense when there is no money to keep your aging parent at home.
It does not make sense when you are trying get a parent on Medicaid to keep a parent’s assets so the kids can inherit them at the sacrifice of qualify of life for the aging parent.  In fact, anticipating that your parent will live in a nursing home is sometimes the financial advisor’s strategy in giving the advice to “let the government take care of your parent”.
I wonder how many of those who encourage intentional impoverishment of aging loved ones have ever spent much time in the nursing homes they plan to put the parents into, once they get Medicaid and need care.  I wouldn’t recommend a nursing home as a great first choice for anyone.
I often hear adult children asking the question:  “Can we have Mom or Dad give away assets so they can get on Medicaid?”  The answer is often “yes”, one can do this legally, by following the complex rules for qualification, but does it make sense in the long run?
I invite these adult children to visit some nursing homes and take an unannounced tour.  See what life would be like there for your parent. Ask your parent if that life is what they would look forward to if they needed full time care, or even daily help with the activities of daily living.  Reality may be different from one’s fantasy of “having the government take care of mom or dad”.
If you are thinking about this issue in your own family, I recommend these steps to weigh with the advice you receive from any financial advisor.
1.  Ask your parent what he or she wants for the long run.
“I want to stay at home as long as possible” may be in direct conflict with “I want to leave my assets to you kids and grandkids”.  Some people simply do not have sufficient assets to do both, should they live long enough to need care.
2.  Figure out the cost of caregiving at home.
There are many services that enable an older person to remain at home with additional care and services such as meals-on-wheels, adult day services, and home modifications. You will want to understand all the options in your community and calculate the costs. A tool that will help you determine the cost of care options in your area is MetLife Aging in Place Workbook at www.MatureMarketInstitute.com. See this for guidance and assistance in assessing the care needs of your older relative and whether they can be met at home.
3.  Compare the cost of home care services with your parent’s income and assets.  If there is no way their assets can match what they will need at home, and no other resources are available from you, or anyone else, by all means get legal advice about qualification for Medicaid.  However, if they can take care of themselves with what they own, put their needs first and “your inheritance” second.  Sorry, it’s their money.  They deserve to stay at home with services if they want to.
4.  Be realistic about expectations concerning inheritance.
Any competent estate attorney will advise adult children that no one is “entitled” to an inheritance.  An aging parent can do whatever he or she wishes with assets.  When parents lose competence and need daily supervision or have physical decline and need paid caregiving, they can burn through their assets rapidly.  If your parents don’t have long term care insurance, they are likely to be paying out of pocket for the care they may need with advanced age. If that care lasts long enough, there may be nothing left when they pass.
As a person who makes a living giving advice to those with aging loved ones, I learn a lot from my clients.  One thing I have learned based on not only my own experience but also on research is that our parents are likely to want to stay in their own homes.  Most are happier if care can be brought to them, rather than expecting them to go to where the care is delivered in a facility.
With that in mind, I hope you’ll carefully rethink any advice about relying on government benefits for your aging parent.  Considering how to provide the best quality of life for them as they age needs to be the priority.  Caring can take many forms.  Helping parents plan ahead is one way to show you care.
Look down the road. Learn from what your parents did or didn’t do to plan for this phase of life.  One day, it will be us.
Until next time,
Carolyn Rosenblatt
AgingParents.com