Financial Resources in Assisted Living

Article reprinted with permission from Kemper, P., & Murtaugh, C.M. (1991). Lifetime use of nursing home care. The New England Journal of Medicine: 324 (9): 595-600. This article was brought to our attention by Potomac Homes.
For more information, they can be reached at 800-935-9898 or visit their website: www.potomacgrouphomes.com.

Today's seniors enjoy a life expectancy longer than any generation in history. An American who turned 65 in 1998 could expect to live nearly another 18 years beyond their 65th birthday. And while additional years are generally considered an blessing, it is also true that the older one grows, the more likely they will need health care services. Today's seniors, who often consider themselves among the best informed, would do well to learn about three crucial areas that pertain to their future health care needs: the potential that they may need long term care, the cost of long term care and the limited federal and state aid available.

According to a study by the Agency for Health Care Policy and Research, more Americans than ever will expect to utilize some type of long term care during the remainder of their lives. And with the number of people over age 65 expected to grow to 20 percent of the U.S. population by 2030, there is little doubt that demand for long term care services is poised to increase dramatically.

Long term care services have evolved dramatically over the past several years. Where the majority of long term care was once provided only in skilled nursing homes, long term care services today are provided in a wide range of settings, ranging from in-home care to community-based facilities such as adult day care and assisted care facilities to nursing homes. The cost of long term care can be significant, regardless of the setting in which it is provided. The average cost of a nursing home nationally is approximately $70,000 a year, and home care costs can reach up to $300 a day.
Medicare and Medicaid provide only limited help for nursing home care. Medicare is our Nation's basic health insurance program for people 65 and older, regardless of their income, who qualify for Social Security benefits. Medicare has two Parts: Hospital insurance (Part A) which helps pay for inpatient hospital care and certain follow-up services; and Medical Insurance (Part B) which helps pay for doctors' services, outpatient hospital care, home health care, hospice and other medical services. Medicare only pays for the first 20 days in a skilled nursing facility - and only after a hospital stay of three days or more. The patient or their family pays the first $99 per day from the 21st day through the 100th day, after which Medicare pays nothing. Medicaid rules vary from state to state, but as former U.S. Senator David Durenburger told the U.S. Senate Special Committee on Aging, Medicaid "dictates that people must effectively impoverish themselves in order to receive government assistance." Medicaid is essentially medical aide for those who have already spent down their assets.

Under Section 1915(c) of the Social Security Act, Medicaid law authorizes the Secretary of the U.S. Department of Health and Human Services to waive certain Medicaid statutory requirements. These Medicaid Waiver programs enable States to cover a broad array of home and community-based services (HCBS) for targeted populations as an alternative to institutionalization. Waiver services may be optional State Plan services which either are not covered by a particular State or which enhance the State's coverage. Waivers may also include services not covered through the State Plan such as respite care, environmental modifications, or family training. To be a waiver participant, an individual must be medically qualified, certified for the waiver's institutional level of care, choose to enroll in the waiver as an alternative to institutionalization, cost Medicaid no more in the community under the waiver than he or she would have cost Medicaid in an institution, and be financially eligible based on their income and assets. Though 38 states pay for some assisted living, the programs are miniscule, covering fewer than 100,000 poor people, so waiting lists are long. Medicare covers home care, but just 100 visits in the weeks following a hospital stay. Contact your state Department of Health and Senior services to learn more about waiver programs.

The White House recently authorized Medicare coverage for the treatment of Alzheimer's disease. This means that Medicare beneficiaries can now receive reimbursement for mental health services that were formerly denied because the government rationalized that people with the disease did not respond to mental and physical therapy, this has since been proven incorrect, hence the reversal of their position. Medicare was never intended to cover the costs associated with custodial care, which is room and board, and activities of daily living, and these coverage changes still do not reimburse for this, further Medicare requires a three-day prequalifying hospital stay before they pay for care in a nursing home. Medicare covers certain care procedures, and some limited rehabilitation therapies. The physicians who visit our homes are all Medicare certified providers, so the cost of their visits is often covered by Medicare, subject to the co-payment.

Many families of Veterans may not be aware of certain benefits for those loved ones who may be entitled to VA pensions who reside in assisted living. These benefits may be applicable to veterans and their spouses, or even surviving family members of deceased Veterans. For example, the little known Aide and Attendance Pension benefit has been in effect since 1951. A veteran who has 90 days of active duty with at least one of those days occurring during wartime, and is either 100% disabled OR over the age of 65 may qualify for a pension of up to $16,509 per year, (a surviving spouse can receive up to $10,606 per year).

The veteran may qualify regardless of physical condition as long as they were discharged with anything other than dishonorable discharge and be means test qualified. The means test generally excludes veterans with greater than $80,000 in assets, however consulting with a financial planner knowledgeable with VA Pension benefits, can help.

Long-term care insurance is one other way you may pay for long-term care. This type of insurance will pay for some or all of your care depending upon the benefit amount and the setting. Many newer policies feature endorsements to cover costs of home health care and assisted living. The Health Insurance Portability and Accountability Act of 1996, or HIPAA, gives some federal income tax advantages to people who buy certain long-term care insurance policies. These Tax-qualified policies offer deduction of premiums, and other benefits. One national study1 projecting nursing home use noted: "Of the approximately 2.2 million persons who turned 65 in 1990, more than 900,000 (43%) are expected to enter a nursing home at least once before they die." The same study reported that 1 in 3 will spend three months or more in a nursing home and 1 in 4 will spend a year or more. Many seniors opt to purchase a policy with a benefit amount that covers a portion of the expected monthly costs so as to hedge their expected use. Insurer rating services such as www.ambest.com can help to compare insurer's financial strength and offerings, or you can check for free at your local public library. Seniors who purchase these policies early will pay dramatically lower premiums then those who wait until they are 60 or older.

The Pharmaceutical Assistance to the Aged & Disabled program helps eligible New Jersey residents pay for prescription drugs, insulin, insulin needles, certain diabetic testing materials and syringes and needles for injectable medicines used for the treatment of multiple sclerosis. Only drugs approved by the Food and Drug Administration are covered. Drugs purchased outside the State of New Jersey are not covered, nor is any pharmaceutical product whose manufacturer has not agreed to provide rebates to the State of New Jersey. You are eligible for PAAD, Lifeline, or HAAAD if you meet the following requirements: You are a New Jersey resident; your total income for 2005 is less than $20,989 if you are single and less than $25,735 if you are married; and you are at least 65 years of age, OR at least 18 years of age and receiving Social Security Disability benefits.