As people age, they need more and more care as they live longer. It also turns out that a lot of people are aging fast! AARP estimates that 10,000 people turn 65 every day. Understandably, there may be a great deal of confusion about how to pay for long-term care.
Jump ahead to these sections:
- How Do Older Adults Typically Pay for Assisted Living?
- Tips for Paying for Assisted Living With Little Money
The definition of long-term care is everything from in-home assistance to nursing home care. For people over the age of 65 who have Medicare, there is a misunderstanding that Medicare pays for assisted living. It sadly does not pay for it.
So, how do seniors pay for assisted living, and what if they have no money? Frankly, it can be a challenge to support someone well into their nineties if there are no financial resources. The perspective on this problem is changing slowly as out-of-control costs in nursing homes and other care settings become unsustainable. A couple of state and federal programs help people with no money, but they are increasingly complex and confusing. We will start with the traditional ways to pay for assisted living, in case it may help, and then move on to government assistance.
How Do Older Adults Typically Pay for Assisted Living?
Assisted living costs range from $2000 to $5000 a month or more, especially for memory care. That adds up over the years for the time that you may live there. Some seniors start in independent living and then need more care and transition to assisted living, where much of the care is built into the monthly cost.
It is possible to pay for assisted living without a lot of money if you have been wise in your financial planning. Although pensions have become a thing of the past, older generations are more likely to have pensions along with a healthy Social Security benefit. However, even those two support systems may not be enough to pay for assisted living. Here are the ways most older adults finance assisted living.
Older generations often own homes without a mortgage, and they sell their home and take the proceeds to pay for assisted living.
Other options include keeping the house and renting it out for monthly income or taking out a home equity line of credit while keeping the property in case another family member needs to continue living there.
Long-term care insurance
Older long-term care insurance policies pay out a daily amount if you qualify to receive the benefit.
Every policy is different, but most have a 90 day waiting period, meaning if you move to assisted living before qualifying you will have to pay the first 90 days out of pocket. Some policies will cover almost the entire daily cost of assisted living, and others only a portion.
Retirement funds and savings
Of course, most people think of retirement funds in terms of Social Security which you are entitled to at age 62, but at a locked-in reduced monthly amount. However, it depends on when you file for Social Security and how much you earned in your lifetime. As of 2020, the maximum you can receive is $3790 a month. People who worked for the government or didn’t work at all in their lifetimes may not be eligible for social security.
Other retirement funds include stocks, bonds, and annuities. Depending on the type of investments that you have, there are rules and penalties for early withdrawal. Talk with your investment advisor about using funds to pay for assisted living. Additionally, there are some people who have saved money their entire lives. As a result, they may have enough along with social security to pay for assisted living.
If you are a qualified veteran or a veteran’s spouse, you may qualify for a VA pension program.
These programs do not pay for assisted living directly but give you a monthly amount based on need and other financial criteria. The monthly pension can be used to offset the cost of assisted living.
Tips for Paying for Assisted Living With Little Money
If you need assisted living and have little money, it is time to get focused and creative. Leave no stone unturned in your efforts to put together a plan. Verify any government or state program suggestions we make here. Funding and rules change every year. You may want to consider consulting an attorney or financial planner who specializes in Medicaid eligibility.
1. Assess your finances
Assessing your finances might seem obvious, but you can’t know where you are going until you know what you have. Take a look at your income, Social Security, plus any pensions and retirement.
Even if you can cobble enough together to pay the monthly cost of assisted living, there are other expenses associated with healthcare, such as insurance premiums as well as the potential cost of paying additional fees later on if you need more assistance. Start at the end and work your way back. Try and estimate the most you might need and then determine your shortfall.
2. Consider Medicaid
Medicaid is a federal and state program for low-income individuals. The eligibility rules are very stringent and complicated, but it might open you up to other services if you can qualify for some financial assistance. Some states have established a “medically needy program” for individuals with medical needs whose income is too high to be eligible for Medicaid.
Medically needy individuals qualify by “spending down” the amount of income above a state's medically needy income standard. They spend down by incurring medical expenses for which their insurance doesn’t pay for. The spend down allows a person to qualify for Medicaid when they otherwise may not be able to.
In 2021 for example, a single individual 65 years or older, must have an income less than $2,382 a month. In terms of assets, a person aged 65 or older is permitted up to $2,000 in assets to be eligible for nursing home Medicaid or HCBS Waivers. This will give you a general idea of how little income and assets you must have to qualify for Medicaid.
Why does Medicaid matter for assisted living? Because of Medicaid Waiver programs, which we will discuss next. With Medicaid, you will get help paying for additional care and services, which, although it doesn’t help with room and board costs of assisted living, can offset those other costs.
3. Medicaid Waiver programs
Medicaid Waiver programs are too complicated to discuss in detail, but some states opt to “waive” certain aspects of Medicaid eligibility to allow more people into the program. Some programs move people out of nursing homes and into assisted living communities to support them there.
Those same programs may support someone who would otherwise be eligible for Medicaid nursing home placement in assisted living to prevent nursing home admission.
A good example is the Utah New Choices Waiver Program, which states that it helps individuals living “long term in a nursing facility, licensed assisted living facility, licensed small health care facility,” or another “licensed medical institution.” These same folks can choose to move into other “community-based” places, and when they are enrolled in this program, they “may receive an expanded package of supportive services through Medicaid which are intended to help with community-based living.”
The downside of these programs? Difficulty in qualifying and long waiting lists. Also, not every assisted living community will be contracted with the waiver program, so that availability might be limited. You might have to wait for an assisted living room even if you qualify for the waiver program.
4. Consider alternatives
There are board and care houses as well as other senior housing options that fall under assisted living guidelines but might be more affordable. Smaller communities and veteran’s adult foster homes might also be options worth looking into. Pricing of assisted living communities varies quite a bit even within the same community. Be wise in your selection.
The last thing you probably want to do is ask your family, but it is an option. Even a little contribution each month might put you in a position to afford assisted living, but if you are close to Medicaid eligibility, any funds from your family could be counted as income.
There is also a five-year “look back” provision in Medicaid. Assets transferred from family will be considered income within a five-year period of applying for Medicaid.
Paying for Assisted Living with No Money
Paying for assisted living can seem like a daunting task. But, with careful planning, thorough investigation of programs, and consultation with experts, you can find a way. The earlier you begin planning, the better.
- “United States.” AARP, arc.aarpinternational.org/countries/united-states#:~:text=Every%20day%20in%20the%20United,of%20the%20population%20by%202050.
- “Eligibility.” Medicaid.gov, www.medicaid.gov/medicaid/eligibility/index.html
- “Medicaid Eligibility: 2021 Income, Asset & Care Requirements.” www.medicaidplanningassistance.org/medicaid-eligibility/
- “New Choices Waiver.” Medicaid.Utah.gov. medicaid.utah.gov/ltc/nc/