Long Term Care 


Long Term Care (ALTCS) is a day in, day out assistance you need when you have a serious illness or disability that lasts for a period of time causing you to be unable to completely care for yourself.

The top 6 reasons why you need Long Term Care Planning and Protection

  • Independence

  • Helps Protect your Family

  • Provides you with choices

  • Helps protect your retirement savings and family assets

  • Favorable tax treatment

  • Peace of mind


Four Major Questions must be answered

  • Do you need it?

  • Can you afford it?

  • Which combination of benefits is right for you?

  • Which Policy can best provide those benefits for you?

Long Term Care Services is more than just Nursing Homes:

  • Adult day care centers

  • Respite Care Homes

  • Health Care Aide

  • Personal Care Attendant or Chore Services

  • Assisted Living Facilities

  • Hospice Care


What are the chances of needing Long Term Care
At the age of:

  • Age 65: The chances are 4 in 10

  • Age 75: The chances are 6 in 10


Sources: National Nursing Home study, National Center for health Statistics, 1985.

Two Aspects of Long Term Care Planning

  • Home and Community Based Care

  • Nursing Home Care


What is the average cost of Nursing Home Care?

  • Average Cost: $138/day

  • Average Stay: 2.5 years

  • Average cost of 2.5 years: $125,925

  • In 20 years: $345/day or $125,000/year


Source: Department of Health and Human Services, assumes 5% inflation.


Who will pay for Long Term Care?

  • Four sources of funds to pay Long Term Care


Medicare and Medicare Supplements

  • Pays less than 8% of Long Term Care Costs Covers only skilled care


Medicaid/ ALTCS ( Arizona Long Term Care System)

  • Regulations vary from state to state

  • To qualify you must “spend down” to government established poverty levels


The Health Insurance Portability and Accountability Act of 1996

The Government has sent a clear message that it is your responsibility to take care of your Long Term Care needs.

  • LTC premiums are deductible as a medical expense

  • LTC benefits received are tax-free

  • LTC expenses not covered by insurance are deductible

  • Employers who pay premiums for an employee are entitled to deduct that premium as a business expense, as they do for medical insurance.

  • Premiums paid by an employer on behalf of an employee will not be treated as income to that employee

  • Self-employed individuals can deduct 60% of premiums as a business expense for the year 2000


Who will pay the cost of Long Term Care?

  • Your Personal Savings

  • Can you afford to gamble?

  • Long Term Care Insurance

  • Share the risk with the insurance company


What are the Financial Risks you face today?

  • Your home destroyed by fire: ……1 chance in 1,200

  • An auto accident liability suit: ……1 chance in 240

  • A major medical expanse: ……….1 chance in 4

  • * Most people have insurance to cover the first three risks*

  • Source: Sadler and Newman, LAN, November, 1993


Four Questions you need to be able to answer

  • Do you have Longevity in you family?

  • Do you think you could spend down your savings if there was a long term care illness?

  • Do you think long term care expenses can be one of the single greatest risks one may face in their lifetime?

  • Do you want a family member to take care of you? Will they and Can they?


2006 Costs of Long Term Care Services

  • $197 per day

  • $72,000 per year



In Arizona, we operate under a modified form of Medicaid administered by the Arizona Health Care Cost Containment System, [AHCCCS], and its subsection, Arizona Long Term Care System, [ALTCS]. It is a needs-based program that pays for individuals in their home, in adult care facilities or nursing homes. The applicant must meet certain medical and financial criteria, and be a citizen of the United States or resident legal alien. There are different rules for single people and married people. The timing of the application for assistance with long-term under ALTCS is important. Some planning procedures cannot be initiated after application or after the individual has been in the nursing home for an extended period of time.

If you don’t have long-term care insurance or you don’t have the financial cushion to pay for the cost when a long-term need arises, the remaining option is ALTCS. If you meet the eligibility requirements, ALTCS will guaranty a nursing home bed or will supply in-home respite care. It will pay room and board, medications, and whatever is considered medically necessary. This is not a free lunch. If you have any assets, ALTCS will require you to liquidate (“spend-down”) these estate assets to pay for a certain amount of your long term care costs before ALTCS will provided financial assistance. This process is know as the “spend-down” statute, and is explained below.

Asset Protection Planning When Qualifying for Medicaid
In Arizona, eligibility for ALTCS is a three prong test: health, assets and income.


  • Health:
    The determination is based on how many of the activities of daily living applicant can no longer do. For example, points are given for the inability to feed oneself, walk, dress, dementia, etc. Dementia has a high point count and with enough points, the applicant meets the criteria of this prong.

  • Assets:
    Countable assets are any that could be converted to cash including such things as cash value of life insurance or IRAs. Some assets are not countable such as the home (Note 1) of the applicant and a burial plot. If the applicant is married, the assets of both spouses will be totaled and then divided between them. At present the non-applicant spouse is guaranteed a minimum of $19,200 if there are that many assets, and may only have maximum of $95,100.


    To be eligible, the applicant cannot have countable assets in excess of $2,000.00. Most of the planning for eligibility will be involved in doing something of value to the applicant and his or her family with the half of the assets assigned to the applicant plus any excess assets above the $99,540 maximum set aside for the community spouse. This usually will require the spend down of most of the applicant’s share. Determining what assets are countable and how to deal with the spend down is the primary job that an Elder Law Specialist must handle in assisting families. Homestead real property (Note 1), vehicles, nominal insurance, and burial arrangements, as well as several other items, are not countable assets.

  • Income:
    Not all states place a limit on the applicant’s income. The others are referred to as income cap states. Arizona is an income cap state. Here, currently, the gross monthly income of the applicant may not exceed $1,809 per month. Only money coming in to the applicant is counted. The income of the community spouse is immaterial in the calculations. If the applicant’s monthly income is more than the $1,809, it is necessary to set up an Irrevocable Income Only Medicaid Trust (often referred to as Miller Trust) to hold and distribute the income of the applicant to conform to the in come cape rule. This is complicated and should not be attempted without the assistance of an Elder Law Specialist with knowledge of the Medicaid rules.


    • Note: With the current swing in the ALTCS spend-down statutes, now even the equity in your home may be liened or liquidated under certain circumstances without proper estate asset protection planning.


The applicant for Medicaid (ALTCS) assistance can’t simply give the excess assets away and become immediately eligible. When Congress was establishing this section of the Medicaid law it was obvious that the first thought of the potential applicant would be to give his or her children all of the money and then have the government pay the nursing home expenses. To encounter this, Congress established transfer rules, which apply consequences for gifting of the assets. If the applicant or the spouse gifts assets for other than fair market value, the applicant will be ineligible for Medicaid (ALTCS) for some period of time based on the relationship between the amount of the gift and what it costs the government to support someone in a nursing home. When an application for financial assistance is made, ALTCS will ask for an accounting of all gifts made within the three (3) years prior to the application. This is often referred to as “three (3) year look back period.” Any transfers made more than three (3) years prior to application have no bearing on eligibility. If a trust is involved, the look back period is five (5) years. There are legal strategies that may be available but it’s imperative that you consult with an attorney knowledgeable in the area of Medicaid (ALTCS) prior to any attempt to distribute assets.

Remember, the Medicaid (ALTCS) rules and the dollar amounts used in eligibility determinations are constantly changing. Therefore, the dollar values here should be used as approximations only. Changes in the rules regarding qualification can come by way of Congress, the state legislature and/or state agency administering ALTCS. The law in effect at the time of the application controls. Therefore, if a plan has been devised for you which does not involve immediate application for Medicaid (ALTCS), an annual review of your situation would be in order.

Under current law, an experienced asset protection planning advisor can assist in legally rearranging the assets to make a married person eligible for Medicaid (ALTCS) almost immediately while preserving a maximum in assets and income for the spouse remaining in the community. Also, with a single person, one-half or more of the assets can be sheltered legally with proper planning.

The state will try to be reimbursed for the public funds spent for nursing home care when the individual dies. This area of recovery from the estate of the deceased is continually changing and today’s solution for minimizing that recover may not be applicable when actual recovery is attempted in the future.

Medicaid planning is an area that is dangerous to navigate. Too many people know a little about this sort of planning and make erroneous assumptions on little data or make a blanket recommendation based on what worked for their Aunt Mildred, which may be completely wrong for someone else.

There is an extensive application interview process and pre-planning is essential in order to protect your estate assets and maximize the benefits, of which you may take advantage.

There are certain asset protection programs and long term care insurance, which may assist you.
Contact our office to discuss these matters in more detail.