The decision to place a loved one in a nursing home is often accompanied by an incredible amount of anxiety and stress. Whether the need for long-term care is brought on by a sudden accident or by a long-term, progressive illness, this is likely an unhappy time for both the person entering the nursing home and those who are helping with the transition.
The last thing most people want to do during this time is to deal with the question of how to carry the often overwhelming financial burden associated with nursing home care. However, it is critical to make good financial choices during this period, because these decisions can have far-reaching consequences. Fortunately, there are options for alleviating the burden, and help is available to guide you through this unfamiliar process. Understanding the strategies for paying for home care can ease the stress of the transition.
According to federal government statistics, as of the year 2000, approximately 13 million Americans needed some form of long-term care. This figure is expected to grow to 27 million by the middle of this century. The transition from living independently to living in a long-term care facility, such as a nursing home, is one involving great difficulty for many people. It means giving up a certain amount of control over your own life. No longer are you in your own home, with all the privacy and independence that entails.
Besides the upheaval involved in moving to a nursing home, there is also the stress of figuring out how to pay for nursing home bills that can total $6,000 each month.
Covering the Cost of Nursing Home Care
Aside from choosing the right facility, the number one concern for many families is how to pay for long-term care in a nursing facility. The most common means of paying for care fall into the following categories:
- Out of Pocket.With the average monthly nursing home bill coming in at $6,000, only those with substantial income or savings are able to pay for all of their long-term care from their own funds. However, this is the initial payment method that many families have to use until other benefits take effect.
- Reverse Mortgage. For families who don’t have enough savings or income to cover the entire bill for long-term care, reverse mortgages are becoming an increasingly popular option. Homeowners who have reached a certain age can qualify for a reverse mortgage, draw on the equity in their home, and not have to worry about the loan coming due as long as they reside in the home. This option works for some people, but it is not a good choice for those who are single.
- Private Insurance. Long-term care insurance is a relatively new option that is gaining popularity, but it is not yet a common method of paying for care. Policies can be confusing, and insurance only pays for a set amount per day for a certain number of years.
- Medicare. Medicare is the federal health insurance program that is available to people 65 and over. It provides limited, short-term coverage of some costs associated with long-term care.
- Medicaid. Medicaid is a needs-based medical assistance program that is jointly funded by the federal and state governments. It pays medical expenses for those who can’t afford their own care, and can pay a large portion of long-term care costs for those who meet certain requirements.
Before choosing any of the above options, it is recommended that you consult with an Elder Law attorney to make sure you are selecting the option that is right for you.
While there are other options as well, the focus of this report is Medicaid coverage, and, to a lesser extent, the coverage offered by Medicare.
The Limits of Medicare
Medicare provides limited benefits for long-term care. The program makes a distinction between “skilled care” and “custodial care.” Custodial care is assistance with basic daily tasks like getting in and out of bed, eating, and taking care of personal hygiene, and is not covered by Medicare. Skilled care is for things like injections and physical therapy that require the assistance of nurses or rehabilitation staff. Medicare provides some coverage for this type of care, but it is very restricted.
If you need skilled care and qualify for Medicare, then the program will pay for your first 20 days in a skilled nursing facility. For days 21 through 100, the program will pay a portion of the costs, but you will be responsible for a substantial deductible. After day 100, Medicare does not pay any of the costs of skilled care. Furthermore, because of additional restrictions, Medicare benefits are often terminated well before the 100-day limit.
If you have a private supplemental insurance policy, then it may cover the Medicare deductible for days 21 through 100. If you have a Medicare managed care plan, then your deductible will be covered as long as you meet the plan’s strict eligibility requirements.
Under any scenario, however, you are limited to 100 days of Medicare coverage per “spell of illness.” A “spell of illness” is defined as treatment requiring skilled care for a period of 60 consecutive days. Once you have been discharged from skilled care, your benefit period continues for 60 days. This means that if you once again need skilled care within 60 days after discharge, then the new treatment period is tacked on to the period of care you have just received, until the two total 100 days and coverage is terminated. On the other hand, if you are discharged from skilled care and need treatment again after 60 days have elapsed, a new “spell of illness” begins, and both your deductibles and your 100-day period of coverage begin again. There is no limit to the number of “spells of illness” Medicare will cover.
Since Medicare provides spotty coverage at best, most people who are facing the need for long-term care must look to other sources to pay for their care.
The Need for Medicaid
Unlike Medicare, the Medicaid program provides long-term coverage for nursing home stays, and it covers custodial care as well as skilled care. There are strict eligibility requirements for Medicaid, including caps on income and assets. Despite these strict requirements, it is not necessary to be impoverished in order to receive Medicaid benefits for nursing home care. Medicaid planning, when done properly, is a legal and ethical way to qualify for benefits while still retaining your family’s financial security.
The rules surrounding Medicaid are convoluted and can be confusing, making it necessary to seek professional guidance for the process of Medicaid planning. There are stiff penalties for failing to follow the rules concerning qualifying for coverage, such as making improper transfers of assets in an attempt to qualify.
What Assets Can You Keep?
Medicaid is a need-based program, meaning that your eligibility is determined by whether you have low enough income and few enough assets. Under the rules, your assets are divided into two categories: exempt assets and countable assets. Countable assets are those included in the calculations that will determine whether you are within the qualification limits. Exempt assets are those that are not counted toward your limit. Exempt assets include:
- One home (as long as it is your primary residence), with equity up to $500,000]
- One personal vehicle, if used for your transportation
- Your personal belongings, furniture, and other household goods
- A burial fund for you and your spouse with a total value of up to $1,500, or an irrevocable pre-need funeral contract of any value
- A whole life insurance policy with original face value of $10,000 or less, or term life insurance of any value
Most other assets are considered countable, including:
- Cash, including checking, savings, and money market accounts
- Stocks, bonds, and mutual funds
- Real estate other than your primary residence
- Vehicles other than your one exempt car
- Livestock and farm equipment
- Revocable prepaid funeral contracts
- Certain trusts
- Oil, gas, and water leases or rights
As a basic rule, a single person can qualify for Medicaid if he or she has only exempt assets, plus no more than $2,000 in cash. There are special rules that apply to married couples when only one spouse is in need of nursing home care.
There are two components involved in division of assets: The Community Spouse Resource Allowance and the Minimum Monthly Maintenance Needs Allowance.
To determine the Community Spouse’s Resource Allowance, the couple’s countable assets are totaled. The assets are then divided in half, and the Community Spouse is allowed to keep half of the assets, up to a maximum of $109,560. The couple then has to “spend down” the assets assigned to the spouse who needs nursing home care until those assets are no more than $2,000.
To make sure the Community Spouse not only gets to retain some of the couple’s assets, but also has money coming in each month, there is also the Minimum Monthly Maintenance Needs Allowance. Under this allowance, the spouse who remains at home is entitled to keep an income ranging from $1,821 to $2,739 each month. The government uses a complicated formula to determine the exact amount of the allowance. If the Community Spouse’s income does not reach this level, then a portion of the ill spouse’s income is diverted away from paying for the nursing home and given to the well spouse to reach the amount of the allowance.
Choosing an Attorney
Navigating the Medicaid system can be an incredibly complex and convoluted process, and most people find that, in order to receive the best results, they need the help of someone who knows the rules and has the experience necessary to guide them through a difficult situation.
Medicaid planning generally falls within the expertise of elder law attorneys, but all elder law attorneys are not created equal. How do you go about finding the right attorney for you?
A good place to start is to ask for recommendations from friends or family members who have dealt with nursing home issues. Find out who helped them and what kind of assistance they received. Other good sources of recommendations include clergy members, hospital social workers, or financial professionals.
It is not enough just to go with whomever is recommended; it’s important to talk to several attorneys, and to carefully investigate the credentials of any attorney you’re considering.
When you interview an attorney, find out what portion of their practice is devoted to Medicaid planning. In general, the more time an attorney spends in this area, the more up-to-date he or she is likely to be on the regulations and the strategies you’ll be dealing with. Other questions to ask an attorney include:
- Whether he or she is involved with any organizations that deal specifically with Medicaid or nursing home planning.
- Whether he or she lectures to other attorneys on the topic of nursing home planning.
- Whether he or she has published any books or articles on the subject.
- How many annual hours of continuing legal education he or she receives in the area.
In addition to experience and credentials, it is important that you find an attorney you’ll be comfortable interacting with during this difficult period in your life. When you interview an attorney, pay attention to whether or not he or she really listens to you and responds to your concerns.
Ultimately, your goal is to find someone who is knowledgeable and experienced, and with whom you feel comfortable.