Odds are high that someone in your family will need a nursing home sooner or later. Someone turning age 65 today has almost a 70% chance of needing some type of long-term care, and 20% of people will need it for longer than five years, according to LongTermCare.gov. The average cost of nursing home care is so high that the cost of that care can financially cripple a family.
But there are steps you can take — whether a nursing home is needed now, next month or next decade — to minimize the financial strain of nursing home costs.
You have several options to help cover the costs of long-term care, including one or more of the following:
— Savings.
— Investments.
— Long-term care insurance.
— Federal and state long-term care insurance programs.
— Veterans Administration Aid and Attendance benefits.
— Medicare.
— Medicaid.
Planning for Long-Term Care
Medicare does not provide an all-inclusive long-term care component. If certain conditions are met, Medicare offers limited coverage (up to 100 days per benefit period) for some beneficiaries. Since Medicare does not cover long-term care, the program does not pay for assisted living costs, though it may cover certain services, such as home health or outpatient therapy benefits for assisted living residents.
Ideally, financial planning for long-term care should occur long before the need arises. Long-term care insurance, Medigap and employer-provided or private health insurance plans can offset the cost of long-term care. But if these policies aren’t in place before a major health event occurs, they are usually no longer available to consumers.
Long-Term Care Insurance
Signing up for long-term care insurance before you actually need long-term care is one way to help defray costs if and when you do. Long-term care insurance is used to cover long-term care supports and services, including personal care, in settings such as a nursing home or an individual’s home in their own community.
Long-term care insurance can be a good idea if you plan ahead and do your homework, says financial planner Shanna Tingom, co-founder of Heritage Financial Strategies, an investment firm in Gilbert, Arizona. As a married couple with both members who own a business, and don’t have children, Tingom and her husband have long-term care insurance for themselves.
“We’ve had it for about 10 years and will continue to keep it and make sure it’s the right kind of insurance for us,” Tingom says. “That’s where a lot of people can run into trouble — they don’t pay attention to how it works, and the daily benefit and inflation riders. And then they get to the point where they need it and it’s not at all helpful.”
It can be useful for consumers to have an insurance expert or a financial professional, Tingom says, “to really sort through what they have, what they’ve been paying for, and more importantly, what it’s going to provide them if they need care.”
Having a care coordinator is a key benefit of Tingom’s personal long-term care policy. “It’s kind of like a concierge,” she explains. “If we needed to be placed in a facility, we could make one call to an 800 number. They would help us figure out what our options were, what the costs out of pocket were going be if our long-term care (insurance) wouldn’t cover it all and really help with facilitating that placement.”
Insurers are increasingly offering hybrid insurance plans, which include a long-term care rider within a permanent life insurance plan.
The Cost of a Nursing Home
If your family is facing imminent need for nursing care and doesn’t have an insurance plan for it in place, there are still options to help defray the costs. Make no mistake: Those costs can be staggering. The national annual median cost of care now ranges from nearly $106,000 for a private room in a nursing home to $19,240 for adult day health care services (based on five days per week per year) according to the Cost of Care Survey 2020 by Genworth Financial. A semi-private room ran $7,756 a month, or $93,075 per year. And the average length of stay among all nursing home residents is 485 days, according to a February 2019 report from the National Center for Health Statistics.
[See: Beyond Bingo: Innovative Activities at Today’s Nursing Homes.]
Medicare
Short-Term Nursing Home Stay
Paying for a shorter stay in a nursing home to receive skilled nursing care is different than paying for an extended stay for ongoing assistance and personal care. Convalescent nursing home care, which follows a major surgery or other hospitalization, is typically short-term and can be covered by Medicare.
Seniors and their families facing an imminent need for a nursing home should first determine whether Medicare will cover at least a portion of the stay. The Medicare program provides coverage for rehabilitation — but not long-term care. Medicare will pick up the tab for up to 100 days of care in a skilled nursing facility each benefit period. A benefit period is how Medicare measures the length of stay in a hospital or skilled nursing facility.
Medicare can also help if a long-term nursing home situation looks inevitable but isn’t immediately necessary. For as long as the individual is able to stay at home, Medicare can be tapped for up to 35 hours per week of home health services. Medicare covers home health services like intermittent skilled nursing care, physical therapy, speech-language pathology and occupational therapy for up to 60 days at a time, called an “episode of care.”
To secure these funds, individuals must be living at home — not in a nursing home or other long-term care facility — must have their physician approve a plan of care and must use a Medicare-certified agency. If you require help only with personal care, such as meal preparation, bathing, using the bathroom and dressing, you do not qualify for the Medicare home health benefit. A government-published guide, updated in September 2020, offers details on which home health services Medicare covers.
The U.S. News Best Nursing Homes rankings indicate which nursing homes in each state accept Medicare.
Medicaid
If an individual lacks enough savings to cover the cost of a nursing home — or if the cost of a protracted stay exhausts their assets — they can become eligible for assistance from Medicaid. State Medicaid programs are required to cover nursing home care, according to the American Health Care Association.
“To qualify for these services, a person would have to meet their state’s level of care criteria and financial eligibility requirements,” says Caroline Haarmann, associate vice president of Medicaid reimbursement and research with AHCA. “Eligibility for Medicaid is complex, as there is often more than one ‘eligibility pathway’ that allow a person to qualify for these services. Some of these are options the state can choose, while others are mandatory.”
In addition, depending on how a person qualifies for nursing home care with Medicaid, the state may determine that the beneficiary must contribute toward the cost of their care.
Before applying for Medicaid, seniors who own their home also need to consider the fate of the property. Under federal law, a home is exempt from income and savings limits described above, but if the owner dies while receiving Medicaid nursing home benefits, the government can take the house. Families that want to avoid losing a treasured home, therefore, might choose to forgo Medicaid, especially if the applicant’s life expectancy is short and relatives have the means to pay anticipated costs out of pocket.
A senior may be able to keep his or her home in the family either by adding a child’s name to the deed at least five years before applying for Medicaid or by setting up an asset-protection trust before applying. This type of trust enables a person or couple to transfer some type of property, such as a home or cash-like assets, to another person to hold and manage for their benefit.
A Medicaid lawyer can help you navigate the eligibility requirements. One way to find a qualified lawyer is to call your local bar association and find out which attorneys are teaching seminars on Medicaid planning to other attorneys. The attorney also must be licensed in the same state as the person needing Medicaid assistance because Medicaid laws vary from state to state.
However, accepting Medicaid assistance can limit your facility choices and potentially mean having to settle for less-than-optimal care.
“Nursing homes that have a higher percentage of residents who rely on Medicaid are correlated with lower quality,” says Sean Huang, an associate professor in the department of health systems administration at Georgetown University and lead author of a 2019 study that evaluated rising nursing home rates and out-of-pocket costs for consumers across eight states.
Federal/State Insurance Programs
State-based Long Term Care Partnership Programs can help protect assets of individuals using Medicaid coverage to pay for long-term care services. Most states offer these supplemental programs, such as the Indiana Long-Term Care Insurance Program and the Arizona Long Term Care System, so people don’t have to spend all their resources to qualify for Medicaid.
In Arizona, for example, “If you qualify for Medicaid, you likely qualify for ALTCS,” Tingom explains. “But it’s not a given. It’s an application process, it’s an interview process and it’s not an easy one.”
If you’re a federal worker, consider looking into the Federal Long Term Care Insurance Program, which is sponsored and regulated by the Office of Personnel Management.
[See: 18 Gift Ideas for Nursing Home Residents.]
Veterans Administration Aid and Attendance
According to VeteranAid.org, the Aid and Attendance pension can provide up to $1,881 per month to a veteran, $1,209 per month to a surviving spouse or $2,230 per month to a couple. Like Social Security, this pension is dependable and is paid directly to you by the Department of the Treasury. This benefit can be used for in-home care, board and care, assisted living communities and private-pay nursing homes. Veterans who served on active duty for at least 90 days, with at least one day during wartime, may qualify, as may some widowed spouses of eligible veterans.
“Industry professionals consult the Community Care Program, the Department of Veterans Affairs’ new network of licensed health care providers, as well as Veterans Care Agreements,” says Dana Halvorson, senior director of not for profit and constituent services at AHCA. “VCAs are a new type of agreement included in the VA MISSION Act (of 2018).”
Cost of Nursing Home vs. Assisted Living
Rachel Reeves, director of communications for AHCA/National Center for Assisted Living, says that assisted living is primarily paid for by individuals’ private or personal funds, such as long-term care insurance or personal assets. Medicare does not cover long-term supports and services. Medicaid varies by state, and how the program is set up in each state determines how residents can use Medicaid to help pay for long-term care in home and community-based settings, such as assisted living communities.
“About 1 in 6 assisted living residents relies on Medicaid for their daily care, many of whom spend down their personal assets and rely on Medicaid in order to remain in their assisted living home,” she says.
While assisted living care has a lower price tag than nursing home care, it’s important to understand the difference between the settings. Traditionally, assisted living does not offer 24/7 skilled nursing care like nursing homes. “Residents typically need less assistance with daily activities and are more independent than nursing home residents,” Reeves says.
[READ: Assisted Living Checklist.]
Negotiating Long-Term Care Costs
Most nursing homes won’t lower their rates, which are keyed to the payment levels offered by Medicare and Medicaid. Still, there’s sometimes room to negotiate when it comes to long-term nursing home care costs.
“Sometimes, rather than accept a lower Medicaid rate, a facility will agree to take a lower private pay rate, which is still higher than the Medicaid rate but lower than published private pay rates,” says Howard Krooks, past president of the National Academy of Elder Law Attorneys.
By contrast, assisted living facilities, some of which cannot accept Medicare, and home health agencies often face steep competition, so consumers shouldn’t be shy about talking prices with these organizations. An assisted living facility with a high vacancy rate or no waiting list may be more willing to negotiate a monthly rate, according to Genworth. If you’re considering a home health agency, you may be able to secure a lower hourly or daily rate if you indicate that you’re shopping around for the best price.
Relocating the Resident
If a senior who needs long-term care has children, grandchildren or other relatives residing in a city or state where nursing homes are less expensive, moving that person could be a good option, Krooks says. A move might not only reduce the cost of care, but also make it easier for relatives to check in on the resident. Those deciding whether to move an elderly relative should consider the individual’s health and whether moving away from doctors who have an established relationship with the senior could harm his or her care.
Moving an elderly relative to a new location solely to find cheaper care might backfire if it leaves the patient far from family. Relatives could face higher travel expenses when visiting their loved one, offsetting any family savings.
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How to Pay for Nursing Home Costs originally appeared on usnews.com
Update 10/15/21: This story was published at an earlier date and has been updated with new information.
