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Maybe it’s happened to you: Your elderly mom grasps your hand and pleads, “No matter what happens, please don’t put me in a home.”  

Perhaps you’ve said it yourself, “I’m never going into one of those places!”  

However, no matter what promises we’ve made to ourselves and others, if you are 65 today, there is a 70% chance you will experience a nursing home admission.  

% distribution of long-term care services by age
CDC Vital and Health Statistics Series 3, Number 43 February 2019 Report
% distribution of long-term care service by region
CDC Vital and Health Statistics Series 3, Number 43 February 2019 Report

On the positive side, many nursing home admissions are temporary and involve rehabilitation and short-term care following an acute illness or injury, such as a stroke or fractured hip.  

Many patients return home or are discharged to a less intensive level of care, such as independent senior apartments or assisted living.  

However, many nursing home stays are required due to frailty related to the aging process or chronic illness.  

Nationally, the average length of stay for all types of stays is about 27 months

Paying for nursing home care is something most of us do not want to think about, especially upon learning that the cost can exceed $90,000 annually.  

There are several misconceptions that exist about how to pay for that care, and even well-meaning professionals in healthcare don’t understand the various nuances surrounding the various programs.  

Here are 3 things that most people do not know about paying for nursing home care.

Medicare Benefits for Nursing Home Care are Temporary and Extremely Limited

seniors with grandkids

If your loved one is in the hospital and needs to be discharged to a nursing home, the hospital social worker will most likely tell you, “Medicare will pay for 100 days at the nursing home.” 

This is a total myth.  

What is and isn’t Covered by Medicare?

No one is trying to mislead you, but many hospital professionals are focused on planning for the patient’s discharge, and they are not fully informed about the financial ins and outs of Medicare payment in the nursing home.  

The MAXIMUM benefit that Medicare will cover for nursing home care is 100 days, but only when certain conditions are met.  

Even then, only the first 20 days are fully covered, and days 21 through 100 are billed at a federally mandated rate of $176 per day.  

Medicare will pay for nursing home care if the patient requires “skilled care” after certain conditions are met which include a 3-day qualifying hospital admission.  

However, if the admission is strictly for observation and does not extend to a 3-day stay for treatment, Medicare does not allow that to trigger nursing home benefits.  

Even if the home involved is called a “Skilled Nursing Facility,” that fact does not mean that Medicare is going to pay. 

Skilled care is generally defined as medically necessary care that must be performed by a professional.  

Therefore, needs such as assistance with bathing, dressing, eating, and ambulation are not considered skilled services, and those needs are NOT paid for by Medicare.

Are There Replacement Policies?  

If you watch daytime TV, you have probably heard about the plans offered by insurance companies that are designed to replace traditional Medicare.  

These replacement policies are widely advertised to seniors on television and in print, often endorsed by older celebrities that resonate with the target audience. 

If you are assisting one of your parents regarding their Medicare coverage and insurance matters, you may be surprised to find out your parent has exchanged their federally- funded Medicare plan for a private replacement policy.  

There are multiple insurance companies that offer these replacement policies and benefits vary widely between insurers.  While most nursing homes are eligible to bill traditional Medicare for qualifying nursing home care, most replacement plans will not pay unless they have specifically contracted with the nursing home provider.  

This can create issues for the patient if there are no convenient contracted homes nearby, and they are placed in a home far away from family and friends.  

This can especially be an issue if their support network includes an elderly spouse who may not be driving any longer. No matter what the replacement plan is, it is still designed to be temporary coverage with limitations, just like traditional Medicare.

Long Term Care Insurance is a Valuable Option

senior women painting

There is insurance coverage that you can purchase that will pay for long term care. These policies often pay for additional services such as home health care, homemaker services, aides to perform assistance with care in the home, adult day care programs and assisted living facilities.  

When Should I Purchase Long Term Care Insurance? 

Most individuals purchase coverage between ages 55 and 64, but premiums can be significantly less if the insurance is purchased before age 60 and before any major health event.  

Some people assume that since long term care is more likely to be used by the elderly, it might make sense to wait to buy the insurance.  

However, current statistics show that just over 15% of current nursing home residents are under 65.  

These policies often are designed with a waiting period, perhaps 60 days or longer, that must be met before benefits are paid.  Due to the rising costs of healthcare, many policies often have an inflation factor built in so that as the cost of care rises, the benefits also increase.  

How Much Will it Cost?

Depending on the services covered, benefit period, waiting period and other factors as well as the age of the individual, cost of coverage varies widely.  

Some sources report the average cost to be about $2,700 per year.  Some examples uncovered rates from different companies ranging from $2,400 a year (policy initiated at age 40) to $3,600 a year (policy initiated at age 64). 

Approximately 20% of employers offer this type of coverage to employees. It’s typically a benefit fully paid by the employee, however there may be some discounting due to the employer group size.  

Most employer-offered long term care insurance will be fully portable when the employee changes jobs, and there is a benefit to keeping it in force since rates are usually set according to age at time of purchase.  

Over the last few years, many insurers have dropped out of the market, and today’s policies are offered by a handful of companies.  

Several companies severely underestimated the benefits that would be paid for nursing home care and applied to insurance commissioners for rate increases.  

If you are assisting an elderly parent through this process, and they have long term insurance, they have done a good job protecting their assets. One way you can continue to help your parents through this process is to be listed with the insurance company to be notified if there is non-payment of premium. This allows you to help your parents monitor staying current on payment for this valuable benefit.

Medicaid is Available Only for Those with Minimal Assets and Income

seniors in sunglasses sticking tongue out at camera

Medicaid is a program mutually funded by the states and the federal government.  

It is designed for those who have limited income and covers qualified families, the disabled and the elderly.  

Today, approximately 62% of nursing home residents have their care paid for by Medicaid.  Since the program is administered by the states, the rules, thresholds and regulations vary from state to state.  

Graph of percentage of Medicare & Medicaid long term care
CDC Vital and Health Statistics Series 3, Number 43 February 2019 Report

Who Qualifies for Medicaid?

For a nursing home resident to qualify for Medicaid, most states require that the patient’s monthly income does not exceed $2,300 and that the patient’s assets not exceed $2,000.  

Income is from any source, including wages, pensions, social security or disability payments.  

Asset calculation is a bit more complex because there are allowances for a spouse living in the home and exemptions for certain resources.  

The process of applying for Medicaid will also include a 5-year “look behind” period where the agency will evaluate whether assets were disposed of by gifting or under-valuing for the purposes of meeting Medicaid qualification.  

Sometimes an elderly person who is admitted to a nursing home and is not expected to return to their own home will sell their residence, pay privately for nursing home care from the proceeds, effectively “spending down” their assets until Medicaid deems their asset level low enough for qualification.

In recent years there has been a developing practice of elder law attorneys whose objective is to help older individuals shelter assets and manage income in order to qualify for Medicaid.  

These services and the steps necessary are neither easy or cheap, and sometimes create a situation where individuals do not achieve their desired result. 

Most of these strategies involve trusts and other legal documents and transfers of resources.  It is important to note that Medicaid rules regarding assets are complex and can be changed, and an error regarding the handling of assets could result in disqualification from the program.

What Do I Do Now?

Now that you know how expensive nursing home care is, and the potential of needing it for yourself or a loved one, consider your personal options for paying for such care.  

  • Investigate whether long term care insurance is an option.  
  • Consider having a frank discussion with your elderly parents about their income and resources.  
  • Remember, there is a strong possibility that a nursing home stay will be short term and the patient will return home.  
  • Before transferring any assets or structuring any trusts, investigate how they will fit in the financial plan if a nursing home stay is required.  
  • Finally, consider issues regarding spouses.  If one spouse needs nursing home care, will the other be able to live independently in the family home? 

As you can see, it is a complex issue with many unknowns. Arm yourself with information and seek guidance from experts in order to make the right decisions for you and those you love.

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Posted 
Jan 20, 2020
 in 
Money
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