Nursing home care is costly, but there are ways to manage without going broke.
By: CIFS Staff
Nursing Home Costs and How to Pay
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Many people grow up with grandparents who lived for years in their homes and, despite various illnesses and conditions, never saw the inside of a nursing home.
That still may be true
for some of today’s older adults, a third of whom may never need long-term care
services and support.
However, according to
the U.S. Department of Health & Human Services' Administration on Aging, the
average 65 year old has an almost 70% chance of needing some type of long-term
care – like that at a nursing home – at some point, and 20% will need such care
for more than five years.
With those odds, you'll
need to account for how you'll pay for a nursing home. In this simple and
straightforward guide, we'll explore practical steps, government programs and
financial options to ensure your loved ones get the care they
need.
Nursing Homes vs. Assisted Living
There
are many options out there for older adults who need care or assistance.
Nursing homes, for instance, offer both long-term,
round-the-clock custodial, or nonmedical, care as well as skilled nursing care.
Skilled care can include specialized therapy and services only licensed
professionals can provide, such as catheter management. In many cases, a stay in a
nursing home follows a period of hospitalization.
Assisted living communities, on the other hand, may be
a more suitable choice for seniors who have fewer acute care needs.
“Residents typically need less assistance with daily
activities and are more independent than nursing home residents,” explains LaShuan
Bethea, executive director of the National Center for Assisted Living in Washington,
D.C.
These communities offer assistance with:
- Bathing
and personal hygiene.
- Toileting.
- Meal preparation.
- Medication
management.
Assisted living also typically costs less than a
nursing home facility. According to Genworth Financial's 2021 Cost of Care Survey
(the most recent data available), assisted living costs average about $4,500 per
month.
How Much Do Nursing Homes
Cost?
Nursing home care can be expensive. According to Genworth
Financial, the median cost of nursing home rooms is:
- $7,908 per month for a
semi-private room.
- $9,034 per month for a private room.
Nursing home costs, based on the Cost of Care survey data, can also vary depending on your geographical location:
Factors That Determine the Cost of
Care
In addition to geographic location, there are other factors that
can contribute to the high cost of nursing homes. These include:
Level of care
needed. Generally, the higher the level of care, the higher the cost. If you or your
loved one needs help with daily activities of living, such as medication management,
toileting and getting in and out of bed, your monthly nursing home fee may be lower.
Specialized care, however, comes with a heftier price tag.
Type of facility. As mentioned, assisted living
facilities tend to cost less than nursing homes due the level of care required.
Independent living communities, designed for active older adults who may not need
care assistance, also run less than nursing homes.
Cost of Nursing Homes vs. In-Home
Care
For seniors opting to age in the comfort of their own homes,
in-home care typically doesn't cost as much as a nursing home.
According to
Genworth Financial, the median monthly cost of in-home care is:
- $4,957 per
month for homemaker services.
- $5,148 per month for a home health aide.
How to Pay for Nursing Home Care
The
annual cost for a private room in a nursing home can cost about $108,000 on average.
The good news is there are a few options, including:
- Savings and
investments.
- Long-term care insurance.
- Veterans Affairs Aid and
Attendance.
- Medicare.
- Medicaid.
- Federal and state long-term care
insurance programs.
- Savings and investments
If you are fortunate to have savings or investments
that you can use to pay for a nursing home out of pocket, it is important to know
the pros and cons. There are some complicated tax rules, so it is best to seek
guidance from your accountant or another expert. If you have an individual
retirement account, you can use this money to pay for long-term care. However, you
may have to pay taxes on withdrawals.
Roth IRA: If you have a Roth IRA, you don’t have to pay taxes on any money withdrawn after age 59 ½ because the money you deposit in this account has already been taxed. Keep in mind, though, that the money must have been in the account for at least five years, and you must meet the age requirement. You can also take out contributions you made to this account before 59 ½ without tax penalties, but you can’t take any of the investment gains.
Traditional IRA: The rules are
different for a traditional IRA, which involves pre-taxed money. When you withdraw
money from such an account, both the investment and any gains are taxed at your
current income tax rate. There also is a 10% penalty if you withdraw any money
before age 59 ½. However, there are some exceptions to this penalty, and one is
unreimbursed medical expenses.
Other investments: Stocks, property or
other items may also be used to pay for long-term care. Again, it’s best to check
with an accountant or tax expert before you take any action.
Savings: If you spend your savings on
long-term care, some related expenses may be tax-deductible, particularly if you or
a spouse or dependent are in the nursing home for medical reasons, such as treatment
for or recovery from an illness. However, the total allowable medical expenses must
be reduced by 7.5% of your adjusted gross income.
Long-term care insurance
Signing up
for long-term care insurance before you actually need long-term care is one way to
help defray costs if and when you do. Long-term care insurance is used to cover care
in settings like a nursing home or an individual's home in their own community.
This option can be pricey, though. For instance, a
55-year-old man can expect to pay an annual premium of about $2,200 for this
insurance. The cost for women is about $1,500 higher, and it’s about $5,000 for a
couple, according to the American Association for Long-Term Care Insurance.
Of course, the older you are when you purchase a
policy, the more expensive it will be. Certain serious medical conditions – such as
muscular dystrophy and cystic fibrosis – can also make it difficult, if not
impossible, to purchase a policy.
At the same time, while long-term care insurance
premiums may sound high, it is important to consider the costs associated with
nursing home care. Even if you are able to stay in your home instead of going into a
nursing home, the cost of a home care aide or homemaker can be around $60,000 a
year, Genworth Financial notes.
“People often don’t think that they’ll need nursing
home care, and they assume that Medicare or private health care insurance will cover
it. This can be a costly mistake,” says Dr. Charles Crecelius, a geriatrician and
medical director of post-acute care with BJC Medical Group in the greater St. Louis
area.
He suggests seeking guidance or information from an
insurance expert or financial professional.
“It’s important to know before you get ill or need
long-term care for some other reason what you’re paying for and what to expect,” he
says.
At the same time, an independent insurance broker, someone who is not
affiliated with any particular insurer, can help you find a plan that might work for
you. Some insurers, for instance, have started offering hybrid insurance plans that
include a long-term care rider within a permanent life insurance plan.
Veterans Affairs Aid and
Attendance
The VA Aid and Attendance pension can provide up to $1,881
per month to a veteran, $1,209 per month to a surviving spouse or $2,230 per month
to a couple, according to VeteranAid.org. Like Social Security, this pension is
dependable and is paid directly to you by the Department of the Treasury.
Navigating the specifics of VA benefits related to
long-term care can be challenging. The American Health Care Association suggests
going to the VA website for details about general benefits and to the VA Geriatrics
and Extended Care page for information about benefits and costs for services in
residential settings, such as assisted living communities and nursing homes.
Medicare
Paying for a shorter stay
in a nursing home to receive skilled nursing care is different from paying for an
extended stay for ongoing assistance and personal care. Convalescent nursing home
care, which follows a major surgery or other hospitalization, is typically short
term and can be covered by Medicare, the federal health insurance program for adults
age 65 and older.
Seniors and their families facing an imminent need for
a nursing home should first determine whether Medicare will cover at least a portion
of the stay. The Medicare program provides coverage for rehabilitation, but it does
not cover not long-term care.
“Medicare does provide coverage for care in nursing
homes, but it is subject to certain limitations and conditions,” adds Diane Omdahl,
Wisconsin-based president and co-founder of the Medicare consulting firm 65
Incorporated.
To qualify for Medicare coverage for nursing home care,
the facility must be certified by Medicare as a skilled nursing facility, and the
patient must need continuous care after a minimum of three days in a hospital.
Medicare covers the first 20 days of care at the facility at 100%. For days 21-100,
Omdahl says, the daily copayment is $200. Coverage ends after day 100.
Medicare can also help if a long-term nursing home
situation looks inevitable but isn't immediately necessary. For as long as the
individual is able to stay at home, Medicare can be tapped for up to 35 hours per
week of home health services. Medicare covers home health services – like
intermittent skilled nursing care, physical therapy, speech-language pathology and
occupational therapy – for up to 60 days at a time, called an "episode of care."
To secure these funds, individuals must be living at
home (not in a nursing home or other long-term care facility), must have their
physician approve a plan of care and must use a Medicare-certified provider. If you
require help only with personal care, such as meal preparation, bathing, using the
bathroom and dressing, you do not qualify for the Medicare home health benefit.
The U.S. News Best Nursing Homes rankings indicate
which nursing homes in each state accept Medicare.
Medicaid
If an individual lacks
enough savings to cover the cost of a nursing home – or if the cost of a protracted
stay exhausts their assets – they can become eligible for assistance from Medicaid,
a state-administered health insurance program for low-income individuals. State
Medicaid programs are required to cover nursing home care, according to the American
Health Care Association.
To qualify for these services, a person would have to
meet their state’s level of care criteria and financial eligibility requirements.
Eligibility for Medicaid, however, is complex, as there is often more than one
eligibility pathway that allows a person to qualify for these services. Some of
these are options the state can choose, while others are mandatory.
In addition, depending on how a person qualifies for
nursing home care with Medicaid, the state may determine that the beneficiary must
contribute toward the cost of their care.
Before applying for Medicaid, seniors who own their
homes also need to consider the fate of the property. Under federal law, a home is
exempt from the income and savings limits described above, but if the owner dies
while receiving Medicaid nursing home benefits, the government can take the house.
Families that want to avoid losing a treasured home,
therefore, might choose to forgo Medicaid, especially if the applicant's life
expectancy is short and relatives have the means to pay anticipated costs out of
pocket.
A senior may be able to keep his or her home in the
family either by adding a child's name to the deed at least five years before
applying for Medicaid or by setting up an asset-protection trust before applying.
This type of trust enables a person or couple to transfer some type of property,
such as a home or cash-like assets, to another person to hold and manage for their
benefit.
A Medicaid lawyer can help you navigate the eligibility
requirements. One way to find a qualified lawyer is to call your local bar
association and find out which attorneys are teaching seminars on Medicaid planning
to other attorneys. The attorney also must be licensed in the same state as the
person needing Medicaid assistance.
Federal or state insurance
programs
State-based Long-Term Care Partnership Programs can help
protect the assets of individuals using Medicaid coverage to pay for long-term care
services. Most states offer these supplemental programs, such as the Indiana
Long-Term Care Insurance Program and the Arizona Long-Term Care System, so people
don't have to spend all their resources to qualify for Medicaid.
Negotiating Long-Term Care
Costs
Most nursing homes won't lower their rates, which are keyed to
the payment levels offered by Medicare and Medicaid. Still, there may be room to
negotiate when it comes to long-term nursing home care costs.
Rather than accept a lower Medicaid rate, for instance,
a facility might agree to take a lower private-pay rate, which is still higher than
the Medicaid rate but lower than published private-pay rates.
By contrast, assisted living facilities, some of which
cannot accept Medicare, and home health agencies often face steep competition, so
consumers shouldn't be shy about talking prices with these organizations.
An assisted living facility with a high vacancy rate or
no waiting list may be more willing to negotiate a monthly rate, according to
Genworth Financial. If you're considering a home health agency, you may be able to
secure a lower hourly or daily rate if you indicate that you're shopping around for
the best price.
Relocating the Resident
If a senior
who needs long-term care has children, grandchildren or other relatives residing in
a city or state where nursing homes are less expensive, moving that person could be
a good option. A move might not only reduce the cost of care but also make it easier
for relatives to check in on the resident.
Those deciding whether to move an elderly relative
should consider the individual's health and whether moving away from doctors who
have an established relationship with the senior could harm their
care.
Additionally, it's valuable to consider factors about the quality of life
for the person. For instance, will Mom be able to get visits from her beloved dog?
Will the climate allow Dad to sit outside and enjoy fresh air?
Moving an elderly
relative to a new location solely to find cheaper care might backfire if it leaves
the patient far from family or away from all they know. Relatives could face higher
travel expenses when visiting their loved one, offsetting any family savings.
Bottom Line
Nursing home care can
help individuals in certain circumstances, but it can be expensive. There are a
variety of ways to pay for it, but in all cases, it’s best to plan ahead as much as
possible. Long-term care insurance or setting aside funds to use when needed can
help ensure that you have the money you or a loved one need when nursing home care
becomes necessary.
Source
https://health.usnews.com/best-nursing-homes/articles/how-to-pay-for-nursing-home-costs
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