With baby boomers reaching age 65, 70, and 80 in record numbers – and headed towards age 90 and 100, we know the need for long-term care is growing. The current pandemic only increases concerns about developing health issues that would require care. There is a concern for individuals regarding their health. And – there is the monetary concern.
We all hope that we go to sleep one night and fail to wake up in the morning when it is finally our time to go. This is not always the way it happens. Care in a nursing home here in upstate New York is going to cost an individual $100,000 plus a year. The cost of 24 hour, 7 days a week care at home with certified workers will cost you close to that $100,000.
When trying to get round-the-clock care at home, the problems we hear center around not being able to coordinate workers for needed coverage, workers not showing up for work, or not being sure how your loved one is being treated. Using non-certified workers often reduces the cost but increases the risk. If that worker were to get hurt while caring for your loved one, there is the potential for lawsuits and insurance not providing coverage. The toll on family life may be significant if family members are trying to provide care.
Whether you are looking at a nursing facility or using partial or fulltime care at home, for most individuals, one of the major concerns is how to pay for care. For those that have assets, there is a concern about using up their money and/or running out of the ability to pay for care. The concern may be because there is a spouse dependent on the income and assets to provide for their needs. The concern can be a desire to leave an inheritance for children and grandchildren. Some feel it is too expensive and do not want to pay that much. Individuals often have one of two opinions regarding long-term care expenses.
Opinion one: “I earned and saved these funds. If I use all my savings to pay for my care, that is fine. That is what they are meant for.” These individuals will often choose to do nothing and take on a wait and see attitude.
Opinion two: “I have worked all my life and I do not want to see all my savings go to some nursing home. It is too expensive.” These individuals want to protect their assets and income for a spouse and/or for children. These individuals may look at long-term care insurance or at setting up a trust to protect some or all the assets.
The two scenarios noted above are the concerns of individuals who have resources and can afford to pay for their initial care. The third set of individuals do not have enough income and assets to be able to plan differently. These individuals are at the mercy of whatever happens.
At over $100,000 a year for nursing facility care, the cost can be daunting. You can quickly see how it adds up when you start adding up the costs. The cost of the building itself – property taxes, insurance, repairs and maintenance, cleaning services, and utilities can be significant. Think of the laundry costs alone! Add to that the cost of providing meals and basically operating a restaurant. What does it cost for your living expenses? Add to that the cost of staff to provide all these services. Nurses, aides, administration, janitorial, housekeeping, dieticians, and management all require wages plus payroll taxes, insurance, and benefits to be paid. Consider that you are staffing the facility 24 hours/7days a week/365 days a year.
Medicare and traditional health insurance do not pay long-term care expenses. Medicare does pay for care if the individual is in a nursing facility for rehabilitation. For Medicare to pay the bill, the resident must be in the facility with the anticipation they will be returning home. Medicare will pay the bill when someone enters a facility for a few weeks of physical therapy after a hip or knee replacement. For Medicare to pick up the costs of care, the requirement is that it is rehabilitative and not anticipated to be permanent need.
Traditional health insurance follows the criteria of it needing to be medically necessary. Many individuals enter a nursing home because they can no longer live at home, not because of a medical need. They may need assistance with daily living activities, but this is not a medical reason.
Both Medicare and health insurance pick up some of the costs while an individual is in the facility since there can be a component of medical costs. Medication costs are reimbursed, just like when the individual was at home. Doctor visits, physical therapy costs, etc. are all eligible for reimbursement, whether provided while an individual is living in a nursing facility or at home.
The long-term care component is not covered under Medicare or traditional health insurance. For example, an individual who needs companionship because they are a fall risk is getting long-term care. An individual who needs assistance in bathing, walking, or transferring needs long-term care. These costs are not picked up by Medicare or your health insurance and are considered long-term care costs.
We also know Medicare reimbursements are being cut while costs and the number of regulations are increasing. Facilities are seeing reimbursements for individuals who are unable to pay and who are on Medicaid cut. The current pandemic has only increased the cost of maintaining a resident, trying to keep them safe and mentally healthy at the same time having them isolated to prevent the spread of COVID.
Most individuals do not want to enter a nursing home. We certainly hope the amount of care you need is minimal and can be provided at home either by family members or maybe having a home health aide coming in a few hours a day. If you need a nursing facility, you will enter either as a private pay patient or as a ward of the state.
A private pay patient is someone whom the facility generally sees as being able to pay for at least one year of care out-of-pocket. That is someone who has income and unrestricted assets equal to that $100,000+ available. We will talk about the definition of unrestricted assets in our next post.
If you are not a private pay patient, you are a ward of the state. In this case, your income is taken to pay for your care, but it does not cover the entire monthly bill. The state pays the remainder of the bill under its Medicaid program. If you have a spouse, there are limitations on how much of the income and assets can be taken to make sure there are funds to pay the spouse’s expenses.
Healthy individuals with financial means may first enter an independent living facility. These individuals often function well and care for themselves. They may choose independent living because they no longer want the responsibility of maintaining a home or may appreciate the ability to interact with others. Many still drive and come and go as they wish. Independent living is not much different than living in an apartment in an apartment complex. The advantage for some is you are living among individuals close to your age. Many times, an independent living facility is attached to a nursing facility and you can step up to other levels within the same location as more services are needed.
The next step, assisted living, still has a lot of freedom. There is a need for more assistance, however. Medication monitoring may be necessary. The inability to drive requires assistance in getting to the store, to appointments and other locations. Assisted living facilities often have the option of meal services. There may still be a kitchen in the apartment if someone chooses to cook some or all their meals.
Neither independent living nor assisted living is considered long-term care. These costs will need to be paid out-of-pocket, like ordinary living expenses. After assisted living, the next step would be a nursing facility. Many nursing facilities give first preference to their independent and assisted living residents when an opening occurs in the nursing facility. If no current resident needs to use that opening, it is generally then filled by a private pay patient.
Private pay patients typically pay a higher amount to the nursing facility than what the government reimburses. If a room is available, these patients do have the option of a private room versus a semi-private room. The facility will bill the individual whose pension, Social Security and investments will be used to pay the monthly bill.
If you enter a facility as a private pay patient and run out of money, you then become a ward of the state. Once you are in a nursing facility, you cannot be forced out if you run out of money. If you are in a private room, you may be relocated into a semi-private room. Otherwise, treatment and care are expected to stay the same.
If you do not have the income and assets to pay for one year’s worth of care or you run out of funds after being in a facility, you will be entering the facility as a ward of the state. The expectation is that your income and Medicaid will be paying the bill. Currently, this does not provide for independent living or assisted living options. Medicaid sometimes does pay for a few hours a week of home care; however, not if substantial care is needed.
If you are expecting to enter a nursing home with Medicaid paying most of the bill, you are often required to do a hospital stay first. A doctor must certify that you are unable to return home. You will be placed in the first facility that has an opening – generally without having any choice of which facility that is.
Planning for long-term care expenses and establishing that you can be a private pay patient gives you much more choice and freedom. Look to Monday, August 24th ‘s post for more details regarding paying for long-term care.