In thinking about your long-term care needs, looking to the future may not be easy. No one wants to run out of money to pay for care, but it happens. You may have planned to leave something for your children and find it to be impossible. Many people think that Medicare pays for long-term nursing home care. Unfortunately, it does not, as Medicare only pays for short-term rehabilitation.
Jump ahead to these sections:
- Pre-Planning and Nursing Home Care
- What is Nursing Home Care?
- What About Assisted Living?
- Options for Paying for Nursing Home Care Before You Run Out of Money
- When You Run Out of Money
If you’re looking for suggestions on how to pay for care before you run out of money, continue reading. It is possible that by accessing some other financial resources, you may be able to pay for nursing home care before depleting your estate. In the event that you exhaust other methods or are unable to find any other ways, there are a couple of other options to pay for nursing home care.
Pre-Planning and Nursing Home Care
One of the best things you can do to plan for long-term care is to create some advance care planning. No one expects or wants to go to a nursing home, but planning for that possibility will put you in financial shape to handle it. It is recommended to meet with an estate planning attorney to evaluate your current and future financial assets should you need 24-hour care.
When choosing an estate planning attorney, find someone who also specializes in asset protection for Medicaid. Medicaid Asset Protection Trusts (MAPT) can be a valuable planning strategy to meet Medicaid’s asset limit.
These trusts need to be set up before you apply for Medicaid, and with the exception of California, must be done at least five years prior to applying. So, the earlier the better.
What is Nursing Home Care?
Nursing home care generally refers to care that provides 24-hour nursing to residents who can’t be cared for at home. It is considered a last resort since the care is very expensive compared to assisted living. According to Genworth, nursing home costs in 2019 averaged around $7,500 a month for a semi-private room and a little over $8,500 per month for a private room.
Monthly costs can also vary depending on the state you reside in. Over time, it is very possible to deplete assets to the point where you may need to qualify for Medicaid.
Nursing home care can also refer to skilled nursing facilities following a hospitalization that qualifies someone for Medicare coverage. This is considered a short-term rehabilitation stay following a three-night stay in the hospital for an illness or injury. After fulfilling the rehab program set by a doctor, patients either go home with home health care or are referred to long-term nursing home care.
These are some of the criteria for long-term nursing home care:
- One’s inability to perform activities of daily living (ADLs). This includes bathing, dressing, hygiene, taking clothes off and putting on, using the toilet, transferring, and eating.
- Medical needs such as catheter care, IV medications, injections, and wound care.
- Cognitive impairment due to dementia or some other neurological problem can prevent someone from living safely without 24-hour supervision.
- Behavioral problems like aggression or sexual acting out.
What About Assisted Living?
Assisted living or other alternatives to assisted living tend to be people’s first choice for care, but most assisted living communities are for-profit and private pay. As a result, the care and the environment may be of better quality than long-term care nursing homes that rely on Medicaid funds for payment.
Given the population increase of aging people, assisted living communities have accepted more medically compromised residents. Most communities have beefed up their nursing services to accommodate these more medically frail individuals. However, many assisted living communities will not be able to handle the medical needs of someone who requires 24-hour nursing access. Nor will they be able to do two-person transfers.
Options for Paying for Nursing Home Care Before You Run Out of Money
Before you run out of money, consider some of these options to pay for nursing home care.
1. Personal assets
Consult a financial advisor on how to use some of the funds available from your retirement/stock account, if you have one.
Another option is to sell your home. If your spouse lives in the home, they can move to an apartment or less expensive housing situation.
2. Long-term care insurance
If you have a long-term care insurance policy, that policy will pay out a daily rate for nursing home care depending on their criteria. If the daily rate doesn’t cover the cost, you can augment with savings or other personal assets. It is best to buy a policy before you need it to keep premiums low.
The two basic types of long-term care insurance policies are “stand-alone” policies where you pay a monthly premium. Once you qualify, you will have a per-day cash benefit for care. Other policies are “hybrid” policies that allow for more flexibility by combining life insurance with a long-term care policy. The advantage of this type of policy is that if you die without having used the long term care portion, there is a cash payout to your beneficiaries.
You may want to check with an insurance broker to see what your best option might be. Some people prefer to use other assets to pay for long-term care rather than incur monthly premiums for a long-term care policy.
3. Life insurance policy
Depending on the type of policy you have, you may be able to cash out and use the funds from a life insurance policy to pay for nursing home care.
There are also combination life insurance policies that include long-term care benefits, although these policies tend to be more expensive than standard life insurance policies.
Medicare does not pay for long term care in a nursing home. However, Medicare will cover short-term nursing care in a rehabilitation setting. Depending on whether you have Original Medicare with a secondary policy or a Medicare Advantage plan, your stay will be covered for a certain number of days, usually fully covered for the first 20 days.
Medicare will cover rehabilitation services until the patient has reached their potential or no longer improves. This is determined by the healthcare team including the physician and therapy staff. At that point, Medicare will no longer cover rehabilitation and the patient will be discharged and sent home.
Options for Paying for Nursing Home Care When You Do Run Out of Money
If you do run out of money, you might qualify for one of the following options.
Medicaid is the most common way to pay for nursing home care. Unfortunately, the only way to use Medicaid is to show that you have depleted your assets in order to qualify. You may also have set up an asset protection trust, which can help you qualify for Medicaid. The good news is that once you qualify for Medicaid, there is no time limit on paying for nursing home care.
Medicaid eligibility is determined by the states, and as a result, the income and asset limits may differ slightly depending where you live. It is advisable to find out exactly what your state’s requirements are so you can be certain to qualify.
Generally speaking, the income level to qualify for Medicaid is about $2000 a month. For example, in California, the asset level is $2000 for a single person and $3000 for a couple. Some states also allow Medicaid applicants to “spend down” assets on pre-approved items to get their income and asset levels to the required amount.
When it comes to nursing homes, some nursing home facilities designate a certain number of beds for Medicaid, with the rest saved up for Medicare-covered rehabilitation services. More and more facilities are turning to Medicare-covered rehabilitation stays as the amount of money reimbursed can be better than Medicaid. As a result, some of these communities whittle down their Medicaid beds so that the ratio of Medicare to Medicaid beds is higher.
Medicaid will allow a resident to reside in a Medicaid facility for as long as they continue to qualify for Medicaid. The Medicare three-night minimum hospital stay is waived for Medicaid.
6. VA Benefits for nursing home care
The Department of Veterans’ Affairs (VA) can also help provide long-term nursing home care and other support services. The VA has its own nursing homes that can be contracted out to other community and state organizations. In some places, the VA may manage their own nursing homes.
There is another VA sponsored program that includes “medical foster homes” that contract with the VA to care for veterans. A “medical foster home” is defined as a VA-approved residential home that houses one or more veterans. This same medical foster home will also be under the care and responsibility of a VA medical team, which will provide services on-site as needed.
With these types of programs, veterans have to meet the criteria of physical or mental ailments that require nursing home care. This is determined by the VA when you apply to a VA nursing home.
Here are some other requirements:
- Veterans with a service-connected disability of at least 60 percent or are considered disabled according to VA guidelines.
- Veterans can also qualify for nursing home care without a service-connected disability who meet VA criteria for income and asset levels, like with Medicaid.
The VA may pay all or a portion of care in a VA contracted nursing home. It is advisable to apply for VA nursing home care as soon as you think you may qualify, as beds may be limited with other patients on a waiting list.
Paying for Nursing Home Care if You Run Out of Money
It is possible to pay for nursing home care if you run out of money. However, you can avoid this from happening if you work with a certified financial advisor to plan as early as possible. By planning ahead, you will be able to protect assets, plan for future care needs, and give you and your family peace of mind.
- “How Medicaid Planning Trusts Protect Assets and Homes From Estate Recovery.” Medicaid Asset Protection Trusts, American Council on Aging, 28 March 2019, www.medicaidplanningassistance.org/asset-protection-trusts.
- Wadsworth, Margaret. “Veterans Eligibility for Nursing Home Care.” NOLO, www.nolo.com/legal-encyclopedia/veterans-eligibility-va-nursing-home-care.html.
- “Cost of Care Survey.” Cost of Long Term Care by State, Genworth Financial, www.genworth.com/aging-and-you/finances/cost-of-care.html.