There’s been a lot of publicity in recent weeks about Genworth, the industry leader, increasing long-term care insurance premiums by 20% to 40% on new policies for single women beginning in April.
The spotlight on long-term care was elevated by Genworth’s recent announcement that it’s suspending sales of individual long-term care coverage in California effective March 21.
You can be held responsible for parents’ long-term care costs
While these two developments are a reminder of the importance of having a long-term care plan, your plan is deficient if you have an elderly parent with limited financial resources and you only plan for yourself. Under a little-known law that has been enacted in 30 states to date, you can be held financially responsible for your parent’s nursing home and other long-term care bills.
See Who pays for nursing home care? for a list of the 30 states and information about each state’s law.
These laws, which are known as filial support laws, have been on most states’ books for decades. Their origin traces back to the premise that parents and children are expected to take care of each other throughout life. The law generally provides that a spouse, child, and/or parent have the responsibility to maintain or financially assist an indigent person. There are usually two exceptions: (1) An individual doesn’t have sufficient financial ability to support the indigent person or (2) A child isn’t liable for the support of a parent who abandoned the child when he/she was a minor for a specified period.
Rarely enforced until recently, filial laws are increasingly being used to make children of long-term care recipients responsible for their parents’ long-term care costs. This began occurring when the Deficit Reduction Act of 2005 made it more difficult for individuals to transfer assets before qualifying for Medicaid coverage of nursing home costs.
A 2012 Pennsylvania case, “Health Care & Retirement Corporation of America v. Pittas,” brought the issue to the forefront when an appeals court determined that a son was liable for his mother’s $93,000 nursing home bill under the state’s filial law. This was the result despite the fact that (a) the mother had applied to Medicaid to cover her cost of care, (b) the son had done nothing wrong, and (c) there were three other potentially responsible individuals, namely the mother’s husband and two other adult children.
The Pennsylvania case is a wake-up call for all families in this situation. It’s a scary reminder of the fact that nursing homes, when given a choice, prefer private pay over Medicaid reimbursed expenses. As exemplified in Pittas, in the case of multiple family members, the nursing home can pick and choose who they sue without regard for the family discord that will ultimately ensue. The law doesn’t make all family members responsible, let alone equally.
Unfortunately, the Pittas case is not an isolated situation. Given the recent changes in Medicaid regulations, ongoing billion dollar federal government deficits, increasing long-term care costs and insurance premiums, and new states enacting filial support laws each year, we’re in the beginning stage of a perfect storm for a wave of these types of cases.
Include parents in your long-term care plan
If you’re the child of parents who have limited financial resources, how do you protect yourself from being sued by a nursing home in the event that this is where your mother and/or father reside one day? Number one rule as with most financial planning: Start early. Even if you’re only in your 30s and your parents are n their 50s or 60s, sit down with them, your siblings if applicable, and a professional retirement income planner who specializes in long-term care planning, and discuss this issue.
The cost of a basic long-term care insurance policy is going to be far less expensive in this situation than it will be 10 or 20 years later. A richer policy with a larger benefit, longer duration, and inflation protection should be considered in situations where there are siblings who can share the premium payment.
If your parents are older, don’t have long-term care insurance, have limited financial resources, and require care, work with them to make sure that a Medicaid application for coverage is submitted in a timely manner.
You don’t want to end up like John Pittas, who was 47, owned a business, his wife was pregnant with their second child, his 66-year old mother was recovering from a stroke on a monthly income of $1,000 from Social Security and her husband’s Veterans Administration benefit — you didn’t do anything wrong — but you’re sued and held liable for your mother’s nursing home bill.
DISCLOSURE: Robert Klein is licensed as a Resident Insurance Producer in California (License #0708321).
Robert Klein, CPA, PFS, CFP®, RICP®, CLTC® is the founder and president of Retirement Income Center in Newport Beach, California. Bob is also the sole proprietor of Robert Klein, CPA. Bob applies his unique background, experience, expertise, and specialization in tax-sensitive retirement income planning strategies to optimize the longevity of his clients’ after-tax retirement income and assets. He does this as an independent financial advisor using customized holistic planning solutions based on each client’s needs and personality.