Are You Medicaid Dependent?
By Rob Wrubel, CFP®, AIF®
How do you expect to pay for care, food, shelter, entertainment and community activities for your adult family member with special needs? You may already have an adult family member or a youngster at home and are trying to determine how basic and quality of life needs will be met, today and in the future.
Do you expect all or most of your support to come from government benefits?
Have you taken any steps to prevent against catastrophe if these benefits are cut or eliminated?
Are you Medicaid dependent?
Most families expect to use some form of government support in their planning for their special needs loved one. This is true of families across most income and asset ranges as the value of the benefits is significant – they may add up to hundreds of thousands and even a few million dollars over the life of a person.
The average American family has not planned to save enough for retirement let alone the additional expenses needed to care for a disabled person for decades. Families have expected government assistance to provide food and shelter to meet basic needs for special needs expenses. Forward thinking families have sought to add to those benefits and create a higher quality of life through additional savings and investing and by segregating those assets into a properly funded special needs trust when the timing is right.
Unfortunately, we live in a time of great uncertainty regarding the major government programs of Social Security, Medicare and Medicaid. The United States government deficits loom large, state governments are examining every line item and the economy, while strong over the last two years, concerns many. Uncertainty about future benefits grows into fear and worry for many families expecting these programs to assist us in the future.
If you are living with this sense of fear and worry, then the time has come for you to change your attitude. Many of my clients have put solid plans in place to help them supplement potential benefits. For some, they are seeking to put themselves in position to be able to replace benefits. They share common traits in getting into this position.
Most important is they embrace the desire to do what they can for their special needs family member on their own. For some, the legacy of government benefits has established a poverty mindset. “Quality of life for the disabled is never any good.” “We do not need to do anything ourselves.” Our families always suffer when taxes are cut.” “There’s nothing we can do.” Families taking steps to help themselves do not think this way.
Families who have put plans in place do not have this poverty mindset. They know they can do something to help themselves and work toward their goals regularly and diligently. They take the right actions to have savings in place based on their belief that they make their own futures.
A key foundation of the plan includes a special needs trust to preserve eligibility to key government programs. These programs are there for people that qualify today. We prefer to enhance that foundation by taking a few steps to provide a back-up for some level of care if needed.
I have heard the stories of families that lost government benefits. Colorado recently cut funding for state level programs that were not backed by Federal dollars and there were many people that lost services – full-time residential support, community interactions and supported work. Some families impacted had funded their own savings plans that they used to fill in and replace some or all of the state funding. At the least, the family funding bought time for the guardians and support organizations to come up with a new plan to serve these people.
Take a few steps today to have a back-up plan in place in case the government assistance you plan to use is cut or not available.
- Identify potential needs. This is easier for families with adult members with special needs than those with children. Adult needs do not change as dramatically over time and the supplemental needs can be calculated based on current benefits and assistance received.
- Draft a spending policy that includes annual spending, life expectancy and contingencies.
- Start saving based on the future need, expected return and time horizon of need and savings. You will look to create a pool of capital in the future that can be used to supplement or replace potential benefits.
- Do what you can. Saving a small amount starting today is far better than waiting until you think you can save more in the future. Too many people get caught not saving because they think it will not be enough. You can increase your savings rate in the future as needed.
- Use an appropriate savings vehicle. Do not put money into the special needs person’s name. There are other ways to fund special needs in the future through an account structure that works for your family.
Do not sit back and wait. You have cared for your special needs family member. You have most likely advocated in the schools for better treatment and educational outcomes. You have navigated the health care and therapy groups to your best advantage. Do not sit back and expect Medicaid and Social Security to take care of your future. Get started on building your own pool of resources to care for your special needs family member.
Rob Wrubel, CFP,® AIF® is a Senior Investment Consultant with Cascade Investment Group, member FINRA & SIPC. Cascade Investment Group is not a tax or legal advisor. You should always consult with your tax advisor or attorney before taking any actions that may have tax consequences.