Paying for Extended Care
Experts estimate that 33 percent of men and 52 percent of women will need some type of extended care in their lifetimes. Yet few of us put much time, thought, or resources into planning ahead for our family’s future extended care needs.
The important question is: With average yearly nursing home costs approaching $48,000, how can we access and afford care when we need it?
Basically, there are three common ways to pay for extended care:
Residents of an extended care facility can pay for their care directly from their personal assets. Unfortunately, few people accumulate the necessary wealth to be able to cover all of their extended care needs without assistance from long-term care insurance or taxpayer-funded programs like Medicaid. If a residentís care is paid in part by the government, the residentís house and other assets may be taken by the government upon death of the resident to cover the cost of the residentís care. See the section on Estate Recovery.
Nearly 70 percent of all nursing home residents pay for their care by spending down their personal assets and becoming eligible for Medicaid, a taxpayer-funded program intended to provide healthcare services to the poor. Unfortunately, even many middle class and higher income individuals end up on Medicaid to cover their extended care. Medicare, also funded by taxpayers, covers minimal medically necessary extended care services.
Long-term Care Insurance
Purchasing long-term care insurance from a reputable company is an excellent way to assure that you will have the care and assistance you need in the future, without losing all personal assets or depending on the Medicaid system. Unfortunately, few employers offer it as a benefit and few people, less than ten percent of the population, purchase it. People with long-term care insurance do not have to rely on taxpayers to pay for their nursing home care. However, consumers must plan ahead and purchase the coverage well before they need it. Long-term care insurance is also available for assisted living residences.
Following is a more through look at both government funded programs like Medicare and Medicaid, and long-term care insurance options. Currently, there is limited government assistance for assisted living facilities.
Government ĖFunded Assistance for Extended Care
Supplemental Security Income (SSI)
SSI is a federal supplement income program designed to help aged, blind, and disabled people, who have little or no income. It provides cash to meet basic needs for food, clothing, and shelter. SSI supplemented a personís income up to $552 per month in 2003 and can increase every year based on increases in the cost of living. Persons with income less than $552 are eligible for SSI benefits, but the combined SSI benefit and income may not exceed a total of $552. The SSI beneficiary is allowed to retain $50.00 per month for personal items.
In addition to rules about income, people on SSI must have limited assets. Generally, individuals who are 65 or older with assets under $2000, or couples with assets under $3000 con qualify for SSI. A home or automobile and most personal belongings are usually not considered when determining eligibility. Some assisted living providers will accept SSI paying residents, less $50.00 per month personal allowance. For more information regarding SSI, you can visit http://www.ssa.gov/notices/supplemental-security-income
Medicare is a program that pays limited healthy care costs for people who are over 65 years old or who are disabled. Many people mistakenly believe Medicare will pay for their extended care. In fact, Medicare covers few extended care services.
Medicare plays a small role in funding nursing facility care because of strict eligibility and coverage limits. To qualify for Medicare, patients must meet the following conditions or requirements:
Medicare coverage for patients in skilled nursing facilities is limited to 100 days per benefit period- 20 days of full coverage, plus an additional 80 days of partial or co-insurance coverage. In days 21-100, (in 2011) the co-insurance coverage rate or so-pay is $141.50 per day. The amount changes annually.
Medicare services are evaluated at defined time frames at 5 days, 14 days then at 30 day intervals to determine the resident’s progress and continued benefit of the service. Each interval must be certified by the physician to continue the service.
Medicare coverage may include one or more skilled services: skilled nursing care, physical therapy, occupational therapy, speech therapy, or respiratory therapy
For Medicare to cover skilled nursing care, patients must meet all of the following conditions:
- The patient’s condition requires daily skilled care, not merely custodial or basic care
- The patient has been hospitalized at least three days in a row and
- The patient is admitted to a skilled nursing facility within thirty days of leaving the hospital
- The patient’s care in the skilled nursing facility is for a condition that was treated in the hospital
- A physician certified that the patient needs, and has received skilled nursing services daily since his or her admission into the hospital
When Medicare benefits exhaust (after 100 days), or the patient no longer requires a daily skilled service, all too often nursing home residents and their families find that care must be financed with personal savings or assets until the resident becomes eligible to qualify for state assistance through the Medicaid program.
Nursing facilities require a preadmissions screen (PAS) to determine eligibility for placement. You can get these forms from any facility, county office of the West Virginia Department of health and Human Resources, hospital discharge planner, or home health center. To receive Medicaid assistance, you will have to complete a PAS-2000. Download the PAS PDF
Many consumers enter nursing homes paying for their own costs. Yet, without the protection of long-term care insurance, most will quickly spend down their available funds and be forced to rely on the Medicaid program. About 76 percent of nursing home residents in West Virginia depend on Medicaid to pay for their care.
Preadmission Screening (PAS)
To initiate Medicaid assistance, you will need to complete the preadmission screening (PAS) to determine Medicaid eligibility. Eligibility is determined based on the assets and income of the person who meets medical necessity criteria for nursing home care. Applicants will be ruled ineligible for Medicaid assistance if they have assets greater than $2000, excluding their home, at the time they enter the nursing facility. In the event, applicants will be required to pay for their own care out of their assets until such time they spend their “countable assets” down to $2000 or less.
When you apply for Medicaid, you will be asked about many things such as your income and assets, age, medical expenses, marital status, what forms of insurance you have, and information about your spouse’s assets and income.
You will need proof of your income and assets and proof of your medical bills. Some things you will need to reference and include in the application are:
- Bank books or statements, including joint accounts
- Pension checks (stubs or proof of usual dollar amount)
- Social Security checks
- Real estate value
- Recent medical bills
The point of the initial asset assessment is to determine how much assistance nursing facility residents truly need from Medicaid and to make sure residents pay whatever percentage of their own medical costs that they are able to pay.
Because many people try to give away or divest their assets in order to escape paying their share of nursing facility costs, the West Virginia Department of Health and Human Resources (WVDHHR) will investigate any recent transfers of assets you have made. Any transfer of assets you have made in the last 36 months will be reviewed and any transfers into trusts in the last 60 months will be subject to review.
WVDHHR is supposed to determine your Medicaid eligibility in less than 45 days (or less than 60 if you are disable or elderly). Unfortunately, in some parts of the state, Medicaid fails to meet these goals and getting your eligibility can take much longer. The PAS for Medicaid applicants must first be reviewed by the West Virginia Medical Institute, Inc. (WVMI) for medical eligibility before it is sent to WVDHHR to determine nursing home eligibility.
Many times nursing facilities will work with you and give you placement before your eligibility has been determined, knowing that when the determination is finally made, it will retroactive (meaning Medicaid will pay its share of the cost of services you have already received).
It is important for families to realize, however, that the patient co-pay amount determined by Medicaid will also be retroactive, and the resident (or resident’s guardian) will get a lump sum bill for the cumulative co-pay amount for the months of service already received. This first co-pay bill can cause a financial imposition for families who haven’t been setting aside the appropriate portion of the resident’s monthly income (i.e social security) in preparation for this bill.
Nursing facilities are not legally required to continue serving your loved one indefinitely if he or she regularly fails to pay the patient co-pay
amount set by Medicaid. Letting the co-pay amounts accumulate and build up until they are unmanageable is a very unwise thing to do and can result in an involuntary discharge from the facility. This type of discharge rarely happens, because moist facilities are willing to work out payment plans if the resident or guardian is sincerely willing to make the payments.
Qualifications for Medicaid
There are some assets valued at more than $2000 that Medicaid applicants are allowed to keep without jeopardizing their Medicaid eligibility. For instance, applicants may usually keep both one home and one car. These holdings are not counted among an applicant’s assets. This is one of the rules in place to protect families of extended care residents from having to become impoverished to pay for their loved one’s care.
The following list contains some of the kinds of assets that DO COUNT toward the $2000 asset limit:
Money in the form of:
- Cash, savings, and checking accounts
- Credit union share and draft accounts
- Certificates of Deposit (CDs)
- Savings Bonds
- Individual retirement accounts (IRAs) and Keogh plans
- Nursing home trust funds
- Prepaid funeral contracts which can be cancelled
- Trusts, depending on terms of the trusts
- Real estate other than your home
- More than one car
- Boats or recreational vehicles
- Stocks, bonds, and mutual funds
- Land contracts or mortgages held on real estate sold
There are also types of assets that DO NOT COUNT. These include:
- A home in West Virginia
- Personal belongings and household goods
- One car
- Income-producing real estate
- (The annual income after expenses must equal 6% or more of your equity.)
- Burial spaces and certain related items for you, your spouse and members of your immediate family
- Up to $1,500 designated as a burial fund for you or your spouse
- Irrevocable funeral contract
- Value of life insurance (if face value is $1,500 or less)
- Assets which you and your spouse do not have the legal right to use or dispose of
In the event of jointly held assets, the WVDHHR local county office will assume that each person owns an equal share of the asset. In the event of joint cash assets, the WVDHHR local county office will count the entire amount as belonging to the applicant unless it can be proven that some of the money belongs to other persons.
Aside from assets, the WVDHHR local county office also will look at income. There is no income limit for spouses of nursing home residents. However, virtually all of the resident’s income must be used for nursing care. Examples of the kinds of income counted toward Medicaid eligibility determination include Social Security benefits, pensions, and Veterans benefits.
The WVDHHR local county office will consider the amount of income the applicant has each month in determining what percentage of nursing home costs that Medicaid will pay and what percentage the applicant will be expected to pay out of his or her income. Most Medicaid patients are assigned a co-pay amount that will absorb most of their monthly income. Residents will be allowed to keep $50.00 per month out of their income for personal needs. Residents who are married or have dependent children at home may also be able to keep a certain amount or percentage of their income to provide support to their family. Residents may be allowed to retain income earmarked for paying certain types of medical costs and insurance coverage premiums. Income limits and rules surrounding exemptions are subject to change each year, so the best thing to do is discuss these issues fully with you WVDHHR local county office staff during the application process.
For more information regarding Medicaid eligibility visit:
What about spouses? Income and asset eligibility rules are slightly different for married and single individuals. There are rules in place to protect a certain amount of assets for spouses of extended care residents seeking Medicaid assistance. For instance, in counting assets, the WVDHHR will allow for a “protected spousal amount” (PSA). In 2001, that protected spousal amount was 50 percent of a married couple’s total assets (not to exceed $87,000 and not to be less than $17,400. Again, these numbers are subject to change each year, so be sure to talk with your local WVDHHR local county office staff about what parts of joint assets a spouse can keep.
In 1993 the United States Congress passed a law, the Omnibus Budget Reconciliation Act (OBRA ’93), that requires all of the states to recover monies paid by the Medicaid program for extended care medical assistance when the recipient is fifty-five or older and receives nursing facility services, home and community based services, and related hospital and prescription drug services. Under OBRA ’93, every state must seek recovery from the estate of a Medicaid recipient. States that do not comply risk losing federal money for the Medicaid program.
Medicaid recipients are notified of the estate recovery program when they first apply for Medicaid and during the annual re-determination process. Although a recipient is asked to sign a form verifying that he/she was notified of the estate recovery process, the recipient’s failure to sign the form does not affect eligibility. In other words, the recipient can still receive extended care Medicaid assistance even if he/she refuses to sign the form.
What Happens with Estate Recovery
Estate recovery procedures begin after the recipient’s death. Only property that passes by will or according to the intestacy law of West Virginia if you do not have a will, can be subjected to recovery. When an extended care Medicaid beneficiary dies, the nursing facility is required to notify the count WVDHHR office. This information is then reported to a contract agency, Public Consulting Group Inc.
The estate recovery unit of Public Consulting Group then has three months in which to file a proof of claim against the recipient’s estate. A proof of claim is a legal document stating that the deceased owes the filer a debt and that the recipient’s family members/heirs are sent a notice of action by their county WVDHHR informing them of an intent to place a claim on the real property. The notice also informs them of their right to file for a hardship waiver. The heirs have forty-five days from the date that the proof of claim is filed to apply for a hardship waiver.
The proof of claim is filed for an amount equal to the amount of medical assistance received through the Medicaid program. When the property is sold, the program must be reimbursed from the proceeds of the sale. Alternatively, the recipient’s beneficiaries/heirs may reimburse the program directly and keep the property. Only the portion of the proceeds that represents the recipient’s interest in the property is subject to recovery.
Recovery from a recipient’s estate will only take place after the death of the surviving spouse and when the recipient no longer has any children under 21, nor any blind/disabled children. If certain family members paid for medical treatment or support, the amount of recovery may be reduced by the amount of money contributed by siblings or children, and, in some cases, grandchildren, provided that they are able to present proof of support and medical treatment prior to the receipt of Medicaid. The state can also waive recovery when it is not cost-effective. Currently, estates valued at less than $5000 are exempt from recovery.
Additionally, the following situations qualify for undue hardship waivers and no recovery will occur when:
The recipient’s sibling has an equity interest in the home and was residing in the home for at least one year before the recipient was admitted to the nursing home
An adult child resided in the home continuously for a period of two years before the parent recipient was admitted to the nursing facility, provided that the child can show that the care they provided to the recipient allowed the parent to remain at home without Medicaid assistance for the two year period
The adult child was continuously employed by the family business for at least three years prior to the recipient’s admission to the nursing facility through the date of the recipient’s death, provided that the property subject to recovery is an integral part of the family business and is required for the business to continue
Finally, the recipient’s beneficiaries/heirs may apply for a hardship waiver by presenting evidence that the recovery from the recipient’s estate will jeopardize the survival of the family unit or severely disrupt the family’s income, provided that the circumstances which will cause the disruption were not created by the recipient’s estate plan in an attempt to avoid estate recovery.
An application for a hardship waiver must be submitted to the WVDHHR Bureau of medical Services (BMS) within forty-five days after the filing of a proof of claim. The BMS must issue an approval or denial of the request or notify the applicant that additional time is necessary to consider the request within ninety days from the receipt of the hardship request.
Taking personal responsibility:
The Long-Term Care Insurance Option
Long-term care insurance is a form of health care insurance. Coverage is purchased by paying a monthly premium that depends on your age and health at the time you purchase the insurance. People with long-term care insurance do not have to rely on taxpayers, nor do they have to spend down their assets to access good long-term care services.
Many excellent policies are available at premium rates that generally range from $800 to $2500 per year (or about $67 to $210 per month). People ages 50 to 64 pay lower premiums than people ages 65 and older.
What to Look for in a Policy
When you are ready to select a policy, it is important to seek advice of a licensed insurance agent who is trained in long-term care insurance products to assist you with your selection. For more information about long-term care insurance policies, contact your local insurance agent. Below are some elements of coverage to discuss with your agent.
Scope of Services Covered
The best products pay a benefit that can be used in a wide variety of long-term care settings, including homecare, assisted living residencies and nursing facilities. Be careful of policies that restrict your coverage to only one type of care or pay a benefit for only certain ailments or illnesses.
Daily Benefit Amount
This is the amount the policy will pay per day for care. Consider the average cost of care per day in your area and decide how much you want covered by insurance and how much you think you can pay out of pocket. Policies typically cover expenses of about $100 per day but policies can be tailored to cover greater or lesser amounts.
This is the length of stay your policy will cover. Lifetime coverage is available, although many people choose coverage periods between 2 and 5 years, since nursing home stays are rarely longer than this period.
This is the length of time you must pay for care yourself before the policy becomes effective. The longer the deductible period means the lower your premiums.
It is important to buy either simple or compound adjustment inflation riders with your policy, especially if you are a younger buyer.
Finally, make sure any policy you buy is guaranteed renewable, meaning your policy can’t be cancelled for any reason other than non-payment of premiums. With the help of a qualified agent, comparison shop among policies. Many offer unique incentives for buying their product such as discounts if both spouses buy policies and lapse protection to keep your policy from being automatically cancelled if you accidentally forget to pay a premium.
*A free guide you might find helpful called “Before You Buy, A Guide to Long-Term Care Insurance” can be obtained by writing to the following address:
AARP Fulfillment, 601 E. Street, NW, Washington, Dc 20049.