How can I pay for assisted living?

How can I pay for assisted living?

The cost of Assisted Living Facilities nationwide can vary from $2,000 - $5,000 per month.  Sometimes people have a false sense of security about what their insurance will pay.  It’s important to know right up front that Medicare will not pay for assisted living.  But, don’t give up all hope yet.  There are a few other things you should investigate first.

Have you ever heard:  “You need to know what you need to know before you can ask questions”?  Unfortunately, this is the case more times than not.  You are often at the mercy of the person on the other end of the phone or other side of the desk.  Depending on how they feel that day, how eager they are to get home, or how devoted they are to helping people often makes a difference in the information they share with you.  There have been times when I have felt that people “blow me off” instead of helping me with my needs.  Keep this in mind when you get short answers.  Don’t let them off the hook so easy.  Ask questions to see if there is any way you could qualify.  This is important to you.  Make sure you get all your questions answered.

Some senior living communities offer a “financial concierge service” that can help guide you through the process of qualifying for benefits.  Another helpful option is a “geriatric planner”.  These people can save you a lot of time.  They will have a wealth of knowledge and cut down the amount of time it takes to find out what your options are.  However, if you cannot afford or cannot find a geriatric planner, with a little determination and perseverance you can achieve the same results.  Here are the most common ways people pay for Assisted Living.  Let’s get started.

Long Term Care Insurance

If you have a Long-Term Care insurance policy, it should cover assisted living as well.  If there is a policy designated for home care, it should be able to be used for assisted living too.  There are “facility-only” policies which covers care only in a licensed assisted living facility or skilled nursing facility.

Most insurance policies are very hard for the general public to understand, but knowing your benefits will be very helpful in making sure you get what you have paid for.  It is very common for insurance companies to decline payment on the first go round.  Many times you or an advocate at the assisted living facility will need to contact the insurance companies and discuss these issues in order to get approval.  To qualify most companies will require that you need help in at least two areas of ADL’s (Activities of Daily Living) such as bathing, eating, dressing, transferring from bed to chair, walking, and toileting.

Long Term Care insurance benefits vary widely depending on the policy.  Benefits can range from $1,500 to more than $9,000 per month.

Life Insurance

When we think of Life Insurance benefits, we typically think that the funds are not available until the person’s death.  But a life insurance policy can provide financial support now, if that's when the money would be most helpful.  There are several different ways that policies can be used to pay for care while the person is still alive.  Ask your Life Insurance Agent about cashing out the policy, accelerated, or living benefits.  It can be called any of those terms.  What usually happens is the company will buy the policy back for 50 to 75 percent of its value. The rules will be different depending on the company and type of policy. Some policies can only be cashed in if the policyholder is terminally ill; others are much more flexible.

If the company won't cash it in, you can sell the policy to a third-party company in return for a "life settlement" or "senior settlement," which is usually 50 to 75 percent of the policy's face value. After buying the policy, and giving you the percentage, the third party company continues to pay the premiums until the policyholder dies.  At which time the company receives the benefits.

There are also options called "life assurance" benefit or life insurance conversion program.  This allows seniors to switch the benefit of a life insurance policy into long-term care payments. Life insurance conversion typically pays between 15 and 50 percent of the value of the policy.  Although this is less than a life settlement, it is an option for lesser-value policies that might not qualify for life settlement.

Veterans Benefits

The VA (Veteran’s Administration) can be very generous when taking care of those who served.  If you or your loved one is a veteran, you may be eligible for benefits that can be used to pay for residential care.  If you have service-related injuries or disabilities it will be easy.

Depositphotos_6865480_originalBut there is another set of benefits, known as “Non-Service Connected Improved Pension Benefit with Aide and Attendance” (Aid and Attendance for short) that pays toward the cost of assisted living.  This is available to veterans or a surviving spouse who is disabled and whose income is below a certain limit.  A veteran must have served at least 90 days on active duty and/or at least one day during wartime.  The medical condition doesn’t need to be service related, but you must meet medical qualification.  There is varying information on how much this pays, but the average is a maximum benefit of $1,949 a month for married veterans, $1644 for single veterans and $1056 for a surviving spouse.

People are often told that they have too many assets to qualify for the program.  These folks are not told that they could make some re-allocations or adjustments to their assets without being penalized and then they could qualify!  Anytime a person tries to “safeguard” their finances or assets, it can be quite tricky.  You must make absolutely sure that doing this does not affect eligibility.  Write down names of the people who give you recommendations.  Ask questions more than once to make sure you understand what to do.

You will need to apply through the Veteran’s Administration.  Along with your military discharge papers, you will need a valid medical condition that makes you appropriate for assisted living with a letter stating such from your doctor.  It may decrease time in the office if you also complete the formal application form “Veteran’s Application for Compensation and/or Pension”.  VA FORM 21-526, Parts A, B, C, and D.

Consider Selling or Renting if you Own Your Home

If nobody needs to remain in the home, this can be a valuable resource.  Many times Mom and Dad’s house is treasured and families aren’t ready to take this huge step.  If that’s the case, consider renting the home which will give you a monthly income that could cover the cost of assisted living.

Reverse Mortgage

If you own your own home and  your spouse still needs a place to live, a reverse mortgage might be just the solution you're looking for.  This allows you to borrow money on the equity you have built up in your home.   When the last person is gone from the home, the money needs to be repaid which usually means selling the home.  This is probably not the best choice for a home that you want to keep in the family.

Bridge Loan

If you have trouble liquidating assets quickly, these short term loans are becoming more popular.  They are usually available up to $50,000 and designed to fund the move to assisted living.  Usually used while waiting for the sale of property or to be approved for a pension.  

Private Pay

Personal income or savings is the simplest route, but the cost of a month’s rent can quickly use up your savings.  You can also cash in personal investment portfolios, like 401k plans or IRAs.  Often paying out of pocket is beyond what many can afford for very long.  However, when all your resources have been exhausted, you can apply for Medicaid.

Annuity

If you have a sizable savings but are worried about outliving your resources, you may consider an annuity.  When you purchase an annuity, you pay a lump sum to the underwriters and then you will receive regular payments over a specified time period (usually the rest of your life).

senior patient in a wheelchair looking at cameraThis is one way you can stretch out your money and make sure that you will always have some money coming in even if you live longer than you expected.  The biggest benefit of an annuity is that even if your purchase premium runs out, you can get more money back than you put in.  The underwriters hope to make a profit off you if you die early.  They take the risk that you could live longer.   It can be more beneficial for you than just spending your money on the cost of the stay.

Another advantage of an annuity is that it isn’t fully considered an asset by Medicaid when you apply for government assistance. The income (or your monthly payment) from the annuity is counted as a resource, but the larger sum you originally paid for the annuity is not.  This can be a complex, so it is wise to have an accountant or financial adviser help you.

Medicaid

If you have no savings, financial assets, and your income is low, you may qualify for government assistance or Medicaid, which is a federal program, but administered by each individual state.  Medicaid covers medical benefits for low income citizens with few assets.  There is no rule that requires Medicaid to pay for assisted living.  Many states will allow partial payment but not room and board.  Over 40 states permit some type of funding for assisted living but it varies greatly.  Some states use a Medicaid Waiver program in which a set number of clients can be served so there may be a waiting list.

Medicaid approval is based on financial need.  You cannot “hide” things from the Medicaid office.  There is a 5 year “look back” period.  They will go over your financial transactions for the past 5 years and any gifts of money or assets made during that time period are counted as your resources.  If you are caught trying to spend or “hide” your resources, the penalties are strict and you may be disqualified from receiving Medicaid benefits for a long time.

Frequently Asked Questions

Q:Do I have to spend all my money before I can go to an assisted living facility?

A:   If you are trying to qualify for Medicaid, there is a maximum amount of assets you are allowed to have.  This differs state to state, but is around $2000.  So, if you have a small bank account, but not enough to cover your expenses for any length of time, you  may want to “spend down”.  There are certain expenses that Medicaid will allow you to spend money on and still qualify.  For instance, you can prepay for your funeral and burial without being penalized.

If you have a large amount of assets, it would be wise to consult with an Eldercare Attorney.  There are ways to put money aside and or leave to family members but this is much too complicated to speak about in this article.  Be sure to find an “Eldercare” attorney who has experience in this matter.

Q:I have no nest-egg, but I have Medicaid. How can I pay for assisted living?

A:  As we talked about in the above article, not all states allow Medicaid payment for Assisted Living.  If you are fortunate enough to live in a state that does allow it, this shouldn’t be a problem.  Unfortunately if your state does not permit Medicaid funding of Assisted Living you will have to investigate Nursing Homes since Medicaid does allow full funding for them.  Don’t forget about VA benefits if you are a veteran.  Many people pay for Assisted Living with more than one source.

Q:What medical and healthcare services are provided in assisted living facilities?

A:   It’s really just as the name implies:  assisted living.  Residents can have as much independence as their condition allows, but help is available if and when needed.  Caregivers are available to help with ADLs (bathing, grooming, dressing, eating, toileting).  Some states allow the facility provide assistance or reminders for medication administration.

Q:How is assisted living different from nursing homes?

A:  The typical Assisted Living resident is elderly and has had a slight to moderate decline in health or functional ability and needs help with one or more ADLs.  They require a little assistance to get through the day.  They don’t have severe medical problems that need to be closely supervised by medical professionals.  Nurses may not be in the facility at all times.  The facility itself is usually more home-like with rooms set up like apartments.  There are usually different levels of care available at varying costs.

Nursing home residents typically require around the clock care and often have multiple medical problems that require nursing supervision.  There are nurses on duty 24 hours a day.  Some facilities have private rooms, but they are usually much smaller than an apartment.  In some facilities residents share rooms.  Typically you are charged a set fee for room and board no matter how much care you require.

Q:What happens if my level of care increases when I'm already in an assisted living facility?

A:  Assisted Living facilities have several levels of care.  If you require more care, the staff will meet with you and discuss options.  The more care you require, the more it will cost you.  Once your care becomes more than the Assisted Living Center can safely handle the staff will discuss transferring you to a nursing home where a higher level of care can be given.

Q: What kind of activities and services are available at assisted living facilities?

A:  Most offer nutritious meals three times a day, light housekeeping and laundry.  Residents can be free to come and go if they are safe to do so.  Activities are often planned several times a day and residents can choose to attend if they wish.  Assisted living facilities vary greatly from small to very large, so amenities will vary.  There may have access to a swimming pool, beauty shop, fitness centers or even a happy hour.  Many facilities will allow residents to keep their pet as long as they are able to take care of it and it is not a danger to others.

Contributing Authors

Kelli Wilson, RN

Kelli is a Registered Nurse with over 19 years of experience in long term care nursing homes. Though the years she’s worked up to Assistant Director, and Director of Nursing. Kelli has been involved in admissions, discharges, and arranging home care. She’s also familiar with Medicare/Medicaid requirements and how to preform pre-authorizations.

Latest posts by Kelli Wilson, RN (see all)

    James Conte, RN, BS Nursing, BS Pharmacology

    James is a Registered Nurse with a BS in Nursing, a BS in Pharmacology, and a BS in Electrical Engineering. He brings with him many years of experience working in Long Term Care facilities, and as a Registered Nurse in an Intensive Care Unit. His familiarity with nursing and emergency care provides an invaluable perspective on managed care.

    Latest posts by James Conte, RN, BS Nursing, BS Pharmacology (see all)

      Miranda Booher, RN, ACLS Certified, BLS Certified, Tx Certified

      Miranda’s strongest area of expertise is nursing. She has worked as a registered nurse for over 6 years with 4 years experience on a pediatrics and orthopedic surgical unit and 2 years as a travel nurse, working in critical care and healthcare informatics.

      Latest posts by Miranda Booher, RN, ACLS Certified, BLS Certified, Tx Certified (see all)

        Carolyn Falconer-Horne, Ph.D. Candidate

        Currently working towards her Ph.D., Carolyn is a licensed and certified speech-language pathologist with over 15 years of experience working in rehab hospitals, long term care facilities, and skilled nursing facilities.

        Latest posts by Carolyn Falconer-Horne, Ph.D. Candidate (see all)

          Last modified: February 8, 2017