Medicare is available to senior citizens that have accumulated at least 40 retirement credits, and you can get as many as four credits each year. You earn credits when you pay FICA or self-employment taxes, and in 2021, you get one credit for every $1470 that you earn.
The eligibility age for Social Security is 65, and for Social Security, the age of eligibility depends on your birth year. We should point out the fact that you will also qualify for Social Security if you accumulate 40 credits.
For people born between 1943 and 1954, the Social Security eligibility age is 66, and it goes up by two months per year after that.
To provide clarification, someone that is born in 1957 will become eligible two months after their 66th birthday, and it is four months for someone that was born in 1958. This arrangement continues until 1960 it reaches 67 years of age.
Anyone that was born in 1960 or any year after that will become eligible for their full benefit when they are 67 under currently existing laws. Regardless of your birth year, you can accept a reduced benefit when you are 62, and the reduction would be between 25 percent and 30 percent.
Medicare Costs to the Beneficiary
It is important to budget for the out-of-pocket costs that you have to pay yourself when you have Medicare coverage. There is no monthly premium for Part A, which is the hospitalization portion, but there is a $1484 deductible per benefit period.
This will cover the first 60 days, and there is a $371 daily copayment for the next 30 days. For hospital stays that exceed 90 days in duration, you have to use your lifetime reserve days. You get 60 of them, and the coinsurance for stays that exceed 90 days is $742 this year.
The monthly premium for Part B, which is the portion of the program that pays for treatments that are administered by health care professionals, is $148.50. There is a deductible as well, but it is just $203 this year, and Part B will only pay 80 percent of the covered expenses.
Part D is the prescription drug portion, and there are many different options to choose from, so the premiums, deductibles, and copayments vary.
In addition to these out-of-pocket costs, there is an enormous gap in the coverage. If you require long-term care as an elder, you cannot look toward Medicare for support because it does not cover custodial care.
There is a solution if you take the right steps in advance. Medicaid will pay for long-term care, and the majority of seniors in nursing homes are enrolled in the program. Since it is intended for people with sparse resources, there is a $2000 asset limit.
Some assets do not count, including your home, but there is a Medicaid estate recovery mandate. If you own a home at the time of your death as a Medicaid beneficiary, they would put a lien on your property, so you want to avoid this scenario if possible.
A Medicaid eligibility plan can revolve around the utilization of an irrevocable Medicaid trust. You would surrender access to the principal if you establish the trust, but you could accept distributions of earnings that are generated by appreciable assets.
This can allow you to fund the trust long before you actually need long-term care, and you can convey your home into the trust to protect it from Medicaid estate recovery. If you apply for Medicaid coverage, the assets in the trust would not be counted, with one caveat.
There is a five-year look back period, so the trust must be funded at least 60 months before you apply for Medicaid. Your eligibility is delayed if you violate this look back rule.
The state of Michigan has determined that the average cost for a month in a nursing home in 2021 is $9560. If you divest yourself of assets during the look back period, your eligibility would be delayed by one month for every $9560 that you transferred out of your name.
Schedule a Consultation Today!
We are here to help if you are ready to work with a Troy, Michigan estate planning lawyer to put a nursing home asset protection plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 248-251-1001.