What would you do if you needed long-term care but couldn’t afford to pay for it? For a majority of Americans, the answer is clear.
Nearly two-thirds — 61% — would consider spending down their assets so they could qualify for Medicaid, according to a recent Jackson National Life Insurance Co. survey of 508 people who are between the ages of 48 and 78 and who have at least $100,000 in investable assets.
That is double the share who would consider drawing on their home equity (31%) or moving in with children (30%) to help manage costs.
Contrary to what some people believe, Medicare — the nation’s health insurance program for seniors — does not cover most long-term care costs.
On the other hand, Medicaid — a joint federal and state program that provides health coverage for low-income Americans and others — does cover such expenses but only for those who meet strict income and asset criteria.
Financing long-term care can be a major, not to mention expensive, challenge for millions of Americans. About 80% of those who are 65 or older eventually will need some type of long-term care services, yet insurance typically covers just 4% of caregiving hours, according to Jackson National.
Family members often provide a portion of care for aging loved ones, but Medicaid covers the “lion’s share” of such costs, the life insurance company says.
Qualifying for Medicaid is not easy. For 2024, the income limit for Medicaid eligibility for those over age 65 was around $2,800 per month, or $5,600 for couples, according to Jackson National. In addition, those who qualified in 2024 could not have assets topping $2,000 for individuals or $3,000 for couples. The precise numbers vary by state.
States have the option of establishing a “medically needy program” for those who have major health needs but who also have incomes too high to qualify for Medicaid.
To become eligible, you must spend down your income until it falls low enough to meet the state’s medically needy income standard.
According to the Centers for Medicare & Medicaid Services:
“Once an individual’s incurred expenses exceed the difference between the individual’s income and the state’s medically needy income level (the “spenddown” amount), the person can be eligible for Medicaid. The Medicaid program then pays the cost of services that exceeds the expenses the individual had to incur to become eligible.”
Altogether, 36 states and the District of Columbia use some type of spend down program.
Although nearly two-thirds of Americans say they would turn to spending down income to help cover long-term care costs, this option has drawbacks.
For starters, you will deplete assets you might have planned to pass down to your children or other heirs. In addition, you might have other options that preserve at least some of your assets.
Selling your home and using the proceeds to pay for long-term care can be one option. You could also put some money into a Medicaid asset protection trust that can protect your assets while giving you more flexibility to take advantage of state and federal assistance programs such as Medicaid.
You could also purchase long-term care insurance to help cover the costs of such services.
There are pros and cons to all these options, so you might want to discuss them with a financial advisor or other professional.
Good planning is the key to avoiding spending down your assets just so you can qualify for Medicaid as a means of paying for long-term care services. Indeed, a separate Jackson National analysis found that only about 15% of households with more than $100,000 in investable assets actually end up on Medicaid.
So, spending down assets might not be your best bet. Talk with a financial professional to find the right option for you.
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