Paying for Senior Care is a very important issue that every family needs to deal with. There are many financial questions that need to be answered, as part of the overall search for the best solution for your loved one.
There is a wide range of choices and the cost can vary a great deal due to the following:
The cost of senior housing depends a lot on the range of services you want or need. The range is quite large and can be from $500 to $8,000,. It is lowest while you function independently and highest if you need nursing home care.
At the low-cost end, there is some subsidized senior housing--sometimes called congregate housing, HUD housing or Section 8 Housing--where you pay part of the rent and government funding covers the rest. Your rent is based on the ability to pay—usually a percentage of your income. Unfortunately, many of these programs have long waiting lists and you must have limited income and assets to qualify.
There are some government and community service programs that help reduce expenses so your home continues to be affordable, but many of them are available only to seniors with very limited income and assets. Some possibilities:
Sometimes staying in your own home is no longer an option, even though it is your preference. If you have a progressive disease, a serious disability or severe medical problems, the cost of care at home can exceed institutional care and is often not affordable.
Some of the price breaks for seniors—help with utility bills, meals and transportation—might still be available to people who move from a private home to a senior housing complex. Most of these aid programs are based on your having very limited income and assets. If you owned a home, sold it and put money in the bank, then the increase of your assets could make you ineligible for aid programs you had previously. However, if you own a modest home, sell it and buy a senior housing unit for a similar price, you’d still qualify for some assistance. And then there are some types of senior housing that are subsidized directly: part of the rent is paid by government assistance. For example, there are some board & care homes that accept the senior’s SSI income and return a small monthly allowance to the resident for incidental expenses; and, as noted earlier, there are also some government housing assistance programs, though they often have long waiting lists and serve only seniors with limited income and assets.
Seniors who are experiencing increasing frailty, illnesses or injuries, have a sometimes confusing array of payment options. Some funding sources like private health insurance are strictly for medical care. They do not pay for custodial care such as help with bathing, dressing, grocery shopping or getting around the house. Other funding sources such as long term care insurance or Medicaid do pay for custodial care costs but no medical care, and often have many limitations and restrictions to the coverage. The costs of living for seniors needing housing with services can be covered by a combination of the following:
Check out Medicare, Medicaid and Medigap for an overview.
Medicare is government-funded health insurance that covers acute hospital care, services of medical professionals and some allied health professionals such as physical and occupational therapists, for the elderly and the disabled. Most private health insurance coverage follows Medicare guidelines. These types of coverage are strictly for medical care, so they don’t help directly with housing costs. They don’t pay for help with activities of daily living--like eating, bathing and dressing. Medigap insurance covers some costs that Medicare doesn’t, such as the deductible for hospitalization, but it also excludes coverage for custodial care.
After a hospital stay, Medicare and private health insurance sometimes pay for follow-up care in a nursing home or skilled nursing facility for a limited period of rehabilitation. However, if there is a need for long-term nursing care, the coverage ends. Similarly, Medicare-covered home care is for a limited time period and may consist of visits by a Registered Nurse or Physical Therapist only 2 or 3 times a week for an hour or less each time. Most people with chronic illnesses or progressive diseases like Alzheimer's and Parkinson's often need custodial care but again, Medicare coverage is only for acute hospital care and doctor’s office visits.
Medicaid is a federal medical insurance program administered by the states that provides medical coverage and some assisted living for low-income, low-asset seniors. Individuals or couples who have had to spend down their savings or other assets due to medical bills eventually qualify for Medicaid. Eligibility requirements vary from state to state, with a limit on assets as low as $1500 and a limit on income as low as $600 per month. It is usually possible to retain ownership of a home and a car and still qualify for Medicaid. It is also possible to qualify if you are over the income limit by paying a monthly deductible called a "share of cost." For example, if the income limit is $600 per month and your income is $700, after you spend $100 on medical care costs, Medicaid provides your medical care coverage for the rest of that month.
Medicaid does have some coverage for custodial care, in effect acting as a subsidy for housing-with-services. Medicaid-covered services in most states can include the following:
In addition, some states have combined aid from the U.S. Department of Housing and Urban Development (HUD) with Medicaid funds, to create senior housing-with-services. The availability of such programs is quite limited.
It is well to remember that Medicaid coverage is quite limited. If a person with Medicaid needs around-the-clock custodial care, they will probably have to go into a nursing home. There are also limited choices when it comes to medical care and even nursing home care. Some doctors and clinics do not accept Medicaid for payment, and some nursing homes have few or no beds designated for Medicaid patients. While Medicaid does start paying for long-term care after a person has exhausted their income and assets, there are large penalties if you try to hide your assets or quickly transfer assets to children and others.
SSI is a source of income that is administered by the Federal government, and paid for by general tax funds. SSI is for disabled and for people age 65 or older who have little or no other income. People who receive SSI can use the money for food, clothing, and shelter. SSI can help to pay for senior housing, but the amount is not nearly enough to cover rent in many parts of the country, and much less than the cost of skilled nursing care. Some board & care homes have agreed to charge a special rate allowed by the government to provide custodial care to SSI recipients. The person who accepts this arrangement gets a small monthly allowance for incidental expenses and the remainder of their SSI goes directly to the board & care home. People who qualify for SSI due to low income and assets also qualify for Medicaid. If long term care in a nursing home becomes necessary, it’s the Medicaid that covers the cost.
The U.S. government's Social Security program provides retirement income for people who have paid into the program during their income-producing years. In addition, Social Security payments may go to certain people who are disabled, who are the spouse or ex-spouse of a qualified Social Security recipient, or who are survivors of a deceased Social Security recipient. Those who receive Social Security income can use the funds for whatever purposes they wish. Certainly one of these might be housing. Social Security benefits can help to pay for senior care and housing, but it is usually not enough to cover a large amount of custodial care, or skilled nursing care.
This type of insurance was originally designed to cover the cost of long-term care in a nursing home. With the rise of assisted living as an alternative for seniors who need custodial care but not daily medical care, some insurance companies have greatly expanded this coverage. Some long-term care policies pay for a variety of custodial care services in private homes and in assisted living facilities. This type of coverage can be expensive and is not for everyone.
For seniors who are homeowners, a reverse mortgage, or home-equity conversion, is one way to pay for housing-with-services. It is a means of borrowing money from the amount your home is worth beyond any mortgage debt. There are a variety of lending institutions that provide this, regulated by the federal government. To qualify for this type of financing, the borrower must be age 62 or older and there must be adequate equity built up. Sometimes the requirement is that you own your home free and clear. There may be restrictions on how you can use the funds, but they may pay for:
The conditions of a reverse mortgage require you to repay the loan if you cease to live in the home or, after your death, your heirs must pay back the loan, either through the sale of the house, or with other funds. Since this way of paying for housing has an effect on your heirs, it can be a complex decision requiring much thought and discussion.
Do we need to hire a financial advisor, and if so – how?
What about a will?
How much do the various facility types cost? And what are the differences? When searching for facilities on OurParents, make sure that you look at the starting prices when comparing facilities.
Is it more expensive to go to an assisted living facility or is it better to stay at home and provide In-home care?
There are various resources that OurParents provides in making these hard decisions.