Medicaid

A couple of years ago, we published a series of posts addressing Long-Term Care (LTC) issues affecting farm families. Although there haven't been major legal changes in LTC, the costs have risen steadily, and eligibility requirements have adjusted to account for these higher expenses. We thought it would be a good time to do an update on LTC costs.

The table below illustrates the changes in LTC service costs between 2021 and 2023. In Ohio, home health care experienced the most significant percentage increase, now surpassing $75,000 per year, while nursing home costs have risen above $100,000 annually. It's likely that LTC costs will continue to climb in the foreseeable future.

^{*2023 Genworth Cost of Care Survey}

Another important number is the Medicaid asset exemption limit.  This is the amount of wealth that a person or married couple may own and be eligible for Medicaid. For Ohio, this exemption amount increased slightly as provided in the table below:

As these numbers indicate, to be eligible for Medicaid, an unmarried person can own almost no assets, and a married couple may own only a modest amount of assets.  For anyone not eligible for Medicaid, LTC costs must be paid out-of-pocket until enough assets have been spent down to qualify for Medicaid.  Due to the low Medicaid exemption amount, very few farmers will initially qualify for Medicaid without aggressive prior planning or spending down almost all their assets.

How can farming operations address the potential threat of Long-Term Care (LTC) costs? Unfortunately, for most farmers, there are no simple solutions. Covering LTC expenses out-of-pocket can strain the farm's finances, while qualifying for Medicaid may not be feasible for many producers. However, there are several strategies that can help mitigate LTC risks:

1. LTC Insurance: Long-Term Care insurance policies can cover some or all nursing home costs. Although these policies can be expensive, and not everyone may qualify, it's worth exploring whether a LTC policy is a viable option.
2. Gifting: Assets that are gifted more than five years before needing LTC services are exempt from being used to cover LTC costs. However, gifting means losing control over the asset and missing out on a stepped-up tax basis at death.
3. Irrevocable Trusts: Transferring assets to an irrevocable trust can protect them from LTC costs after the five-year lookback period. While this approach offers more control over the assets than outright gifting, irrevocable trusts can be costly and require ongoing trustee management.
4. Self-Insure: Some individuals choose to build up savings or other assets to cover LTC expenses. This strategy avoids complex planning and legal fees but ties up capital that could otherwise be used to expand the business.
5. Wait and See: Some farm families prefer to wait and assess whether LTC costs will become a reality. They may then gift assets to protect them while retaining enough resources to manage through the five-year lookback period. This approach offers flexibility but risks five years of LTC costs.

Before choosing a strategy, it's crucial to assess the actual risk of LTC costs to the farming operation. Some may have sufficient retirement income to cover LTC expenses, negating the need for extensive planning. For others, LTC costs could threaten the farm and its land, necessitating aggressive planning. Consulting with an attorney or advisor experienced in LTC planning can help determine the best course of action for you and your farm.