Residential care can be costly, but there are a variety of methods to help you and your loved one pay for the necessary services.
How To Pay For Residential Care
For most people, finding ways to finance residential care is a major concern. There are four basic ways in which these costs may be financed:
- Personal Resources—About one-half of all residents pay for costs out of personal resources. When many people enter a nursing home or other care facility, they first pay for their care out of their own income and savings. Because of the high cost of such care, however, some people deplete their resources and apply for Medicaid.
- Private Insurance—Some Medicare supplementary insurance policies, often referred to as “Medigap” insurance, also can provide a source of payment for residential care. Private, long-term care insurance is also available.
- Medicaid—State and federal coverage is available to eligible low-income individuals who need care at least above the level of room and board. The nursing home must be certified.
- Medicare—Under some limited circumstances, Medicare hospital insurance (Part A) will pay for a fixed period of skilled nursing home care. The nursing home must be Medicare-certified.
Many health maintenance organizations (HMOs) and other coordinated care plans participate in the Medicare and Medicaid programs. These health care plans often cover certain benefits in addition to those supplied by Medicare and Medicaid and are experienced in “coordinating” a member’s health care. Some HMOs may also offer more medical or supportive services; others may not require a hospital stay before approving nursing home admission.
If your loved one is enrolled in a health maintenance organization (HMO) or competitive medical plan (CMP), ask a representative of the plan about coordination of health care services between the HMO/CMP and the residential care facility. Ask which facilities the HMO or health plan works with in the area. If your loved one is interested in a facility outside of the area served by his or her HMO, discuss this with the plan representatives.
What Do Medicare And Medicaid Pay For?
Medicare pays for at least some nursing home costs for up to 100 days per benefit period for those who meet coverage requirements and require care in a skilled nursing facility (SNF). The first through the 20th day carry no deductible or coinsurance amounts for the resident; however, the 21st through the 100th days carry a coinsurance amount. This amount is calculated each year and is equal to one-eighth of the annual hospital deductible.
Medicare only pays for care in SNFs following a hospital stay of at least three days and when individuals require daily skilled nursing or skilled rehabilitation (physical therapy, speech therapy or occupational therapy) services that must be performed or supervised by professionals.
Many long-term care facilities have both Medicare and non-Medicare sections. Medicare law does not permit payment for residents in non-Medicare sections of the facility, even if the care needed meets the medical standards for coverage. Therefore, in order for Medicare to pay, the resident must be placed in the section that is certified under Medicare.
To help you avoid such problems, however, SNFs generally work closely with hospital discharge planners and social workers to ensure that only individuals requiring skilled services are admitted to skilled parts of the facility. If the SNF determines that the person does not meet skilled standards and then admits the resident to a skilled part, it must provide the individual with a Notice of Non Coverage. Nursing homes are required to give residents the Notice of Non Coverage at time of admission, or any time after admission, when skilled services are no longer required.
You may appeal the nursing home’s decision for non-coverage of your loved one. Your loved one should not be charged for services until he or she receives a formal decision on his or her appeal from Medicare. However, if Medicare determines that it will not cover his or her stay, your loved one is liable for the cost of care since the start of his or her nursing home stay.
When you visit a nursing home, if your loved one is eligible for Medicare coverage, ask to see a copy of the facility’s Notice of Non-Coverage. Ask some of the residents in the facility if they have had difficulties or misunderstandings with the facility over payments and whether problems were satisfactorily and quickly resolved.
Medicaid pays nursing home expenses for individuals who meet income and resource eligibility requirements. Medicaid can pay for nursing facility care that ranges from skilled nursing care to care that is above the level of room and board, but less intensive than “skilled” care.
It is important to contact your loved one’s state Medicaid agency for eligibility and program information as early as possible. Financial guidelines vary from state to state and can be somewhat restrictive.
Moreover, if either spouse transfers resources, such as real estate or bank accounts, for less than fair market value within 30 months before a spouse goes into a nursing home, this could affect the extent to which the Medicaid program would pay for the cost of care for the spouse in the nursing home and for certain community services.
Long-Term Care Financing And Insurance
Given the increasing likelihood of older Americans having to use long-term care services at some point in their lives, an important part of planning ahead is preparing for your loved one’s financial future. This is important because most home care and about half of nursing home costs are paid directly by consumers and their families.
Medicare supplemental insurance (Medigap) policies generally cover very little long-term care, usually covering only deductibles, coinsurance, and long hospital stays. Medicaid covers nursing home care and some community care benefits such as home health care or adult day care. Coverage varies by state and is generally limited to people with low income and assets.
One option that your loved one might wish to consider is purchasing long-term care insurance. This type of insurance policy covers nursing home care and increasingly includes home care coverage as well.
Because costs for long-term care policies can vary widely, even for similar policies, shopping and price comparison are important. Counseling services may help your loved one select a policy most appropriate to his or her needs. If your loved one is deciding whether or not to buy long-term care insurance, he or she should consider the following questions:
- Will his or her income cover long-term care expenses, along with other ongoing expenses?
- If your loved one purchases such insurance, can he or she pay for the deductible period and coinsurance?
- Can your loved one afford to pay the premiums now? What if the premiums rise?
- Will he or she be able to pay the premiums if his or her spouse dies?
- Will he or she be able to pay for upgrading benefits to meet inflation?
- Would your loved one become eligible for Medicaid if he or she had large medical bills, or entered a nursing home where average yearly costs run almost $30,000?
- Before signing a long-term care insurance policy, your loved one should also ask if he or she has a period during which to cancel the policy and receive a refund for the first premium.
As you shop around:
- Be sure that the policy does not base coverage on medical necessity, or require prior hospitalization before entering a nursing home, or prior nursing home stays for home health care.
- Be sure that the insurer can cancel your loved one’s policy only for reason of nonpayment of premiums.
- Make certain your loved one has realistic inflation protection.
- Check the length of time that pre-existing conditions are excluded.
- Check for permanent exclusions on certain conditions, such as Alzheimer’s disease.
- Finally, if your loved one decides to purchase long-term care insurance, check into the reputation and financial stability of the company offering the insurance. State health insurance commissioner and consumer affairs offices should be helpful in identifying reliable companies.
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Adapted from Your Guide to Choosing a Nursing Home, United States Department of Health and Human Services Health Care Financing Administration.