Nursing home costs continue to climb

One of the greatest fears of older Americans is that they may end up in a nursing home. This means not only a great loss of personal autonomy, but also a tremendous financial price. The median cost of a private room in a nursing home in the U.S. is $74,208 a year, or $203 a day, according to the 2009 Genworth Cost of Care Survey. The highest rates for a private room in 2009 were reported in the state of Alaska, where the median annual cost is $187,610, or $514 a day. The lowest rates were found in Louisiana, at $50,594 a year, or $139 a day. The average length of stay in a nursing home for current residents is 3 years, which makes the median cost of a nursing home stay in a private room approximately $222,624.

Most people end up paying for nursing home care out of their savings until they run out. Then they can qualify for Medicaid to pick up the cost. The advantages of paying privately are that you are more likely to gain entrance to a better quality facility and doing so eliminates or postpones dealing with your state’s welfare bureaucracy - an often demeaning and time-consuming process. The disadvantage is that it’s expensive.

Careful planning, whether in advance or in response to an unanticipated need for care, can help protect your estate, whether for your spouse or for your children. This can be done by purchasing long-term care insurance or by making sure you receive the benefits to which you are entitled under the Medicare and Medicaid programs. Veterans may also seek benefits from the Veterans Administration.

Medicare
Generally, Medicare is the federal program that provides hospital and medical insurance to people aged 65 or older and to certain ill or disabled persons. Benefits may be available for home health care, but only if certain conditions are met. Medicare may pay for up to 100 days of care in a skilled nursing facility per benefit period - 100% for the first 20 days (after a three-day hospital stay, provided skilled care is needed). Then, for days 21-100, Medicare requires a co-payment. To help cover the co-payment, many seniors also have a Medicare supplement insurance policy. In general, once Medicare stops paying for care, the supplement payment will also end.

Medicaid
Medicaid (referred to as MassHealth in Massachusetts) generally pays for certain health services and nursing home care for those with low incomes and limited resources. Medicaid may also pay for some long term care services at home and in the community. Medicaid has limitations on the amount of assets you can own and the amount of income you may receive each month before you are eligible for benefits. Who is eligible and what services are covered vary from state to state. There are also restrictions on transferring assets to others in order to qualify for Medicaid. Medicaid is essentially a form of welfare.

Many elders don’t realize that planning to protect one’s assets from nursing home costs for a spouse or children can be accomplished before or during a loved one’s nursing home stay. Congress has established a period of ineligibility for Medicaid for those who transfer assets.

Medicaid will "look back" for five years prior to entering the nursing home for all transfers during this period. The period of ineligibility or length of penalty depends on the amount transferred during this period. The penalty period is determined by dividing the amount transferred by the average monthly cost of nursing home care in the state. For instance, if the nursing home resident transferred $100,000 in Massachusetts, where the average monthly cost of care is $8,334, the penalty period would be 12 months ($100,000/$8,334).

The 12-month penalty period will not begin until (1) the transferor has moved to a nursing home, (2) he has spent down to the asset limit for Medicaid eligibility ($2,000), (3) has applied for Medicaid coverage, and (4) has been approved for coverage but for the transfer.

For instance, if an individual transfers $100,000 on May 1, 2008, moves to a nursing home on May 1, 2009, and spends down to Medicaid eligibility on May 1, 2010, that is when the 12-month penalty period will begin, and it will not end until May 1, 2011. How the individual now pays for this 12-month period with the assets gone for two years is a dilemma. One needs to plan early to keep assets available to potentially pay if entering a nursing home during the five year look-back period.

Transfers should be made carefully, with an understanding of all the consequences. People who make transfers must be careful not to apply for Medicaid before the five-year look back period elapses without first consulting with a competent advisor. While transfers during the five year period are severely restricted for single individuals, married couples with one individual entering a nursing home have more options.

It is never too late to protect your assets from nursing home costs. Something can always be saved. Seek out competent advisors who can assist you in this difficult time of your life.

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