Legal Advice Doctors Should Give Their Patients on Medicare, Medicaid

June 19, 2012

This week we discuss an issue more doctors need to address with their patients: appropriate Medicare and Medicaid pre-planning.

Nearly the entirety of the dozens of discussions we have shared have centered on issues involving doctors’ personal asset protection, business, and financial planning. This week we discuss an issue more doctors need to address with their patients: appropriate Medicare and Medicaid pre-planning. 

A growing segment of the aging population is going to be relying on the already scarce resources available to the government. To combat this expense the collection efforts against the personal assets of those who need substantial medical services and possibly even residential care has increased significantly. With current healthcare costs for serious medical conditions steadily increasing, any lack of planning, including reliance on traditional estate planning alone, is putting your patients in substantial, life-changing financial jeopardy.

The crucial issue? Patients need to be made aware of and start planning for healthcare cost exposures earlier than ever before. If they don’t, they will be forced to choose between medical care and financial solvency at the cost of their life savings. While this issue is one that it is traditionally supposed to be addressed by their financial advisors and estate planners, my experience is that it is not being stressed heavily enough, if at all. We need your help.

As one example (details changed for privacy): I recently spoke with the Smiths, a couple in their late 70s, at the insistence of their daughter, a physician. Like many people of their generation, their primary retirement and heathcare plan consists of social security and Medicare. The couple has retired to a Sunbelt state and now live in a modest home she purchased for them. Recently diagnosed with cancer, Mrs. Smith was covered only by Medicare and had a small supplemental insurance plan. Post-diagnosis, the Smiths’ physician informed them of the course of treatment required and the extraordinary expenses some of the drugs and treatment would require. Given their reliance on Medicare and the real possibility of needing Medicaid nursing home assistance and the medically related financial exposures they face, here’s what we calculated:

• The couple would likely lose their life savings entirely, in this case consisting of $250,000 in stocks. In order to qualify for nursing home care, as one example, if Mr. Smith was unable to care for Mrs. Smith at home due to his advanced age and frail health, the couple could be required to spend their assets down to as little as two thousand dollars;
• They will also lose a modest investment property that produces a small amount of income. As the income property is in another state and is not a personal residence, it is not protected;
• Any transfer of these assets they attempted to make at this time, either to a relative as a gift, or to a trust, would also be subject to the Medicaid five-year “look back” period, and would reduce and delay the amount of care they received by what they transferred away;

How serious and widespread is this exposure? Consider these rough statistics: 25 percent of retired women live on social security alone; this number can be up to two hundred percent higher for African Americans and Hispanics. More than 50 percent of the population has no pension of any kind; one-third of the population has no retirement savings and more than 25 percent of the general population that receives social security, currently over 12 million people, live off that benefit exclusively. Virtually all of these people will need serious medical care at some point.

I’d ask you to consider making this part of your conversation with older and middle-age clients and break the barrier of silence that seems to exist between most doctors and their patients on issues of medical economics. I’m not suggesting that you give any kind of specific legal or financial advice, but you are among the first lines of education and defense for those you care for. You and your office can introduce ideas and options to explore at a time when they can still make a difference for those at risk by virtue of their social demographics, family history of illness, and age, especially in the vulnerable demographic groups we touched on above. Something as simple as a pamphlet, poster, or article available from Medicaid.gov or Mymedicare.gov could make all the difference they need. 

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