Over the summer, American Public Media’s Marketplace aired an interview on “the costs of taking care of an elderly relative.” After hearing the piece on the radio, I was struck by how little information it actually provided. Just like any other news piece, there is something of an ominous introduction followed by vague “facts.” Aside from stating that it costs “half a million dollars” to care for an elderly relative and glossing over a few government programs, no information was provided on where the figure came from or who may be eligible for the programs mentioned. Instead of empowering individuals to plan for the future, I worry that news pieces like this one leave people feeling helpless and overwhelmed. In this letter, I will take a moment to delve a little deeper into the cost of elder care and how seniors may be able to afford the cost.
First, let us tackle the question of cost: Does it really cost $500,000 to care for an elderly relative? In 2011, the Providence Business News found that the cost of both assisted-living care and nursing home care was higher in Rhode Island than nationally. In fact, a 2012 study by Genworth listed Rhode Island as the seventh most expensive state for nursing home care. According to Rhode Island’s Office of Health and Human Services, the average monthly cost for private payment in a nursing facility is $8,492 per month—totaling a whopping $101,904 annually. After additional costs are factored in —such as the cost of medications—$500,000 would cover nursing home costs for a little more than four and a half years. So yes, elderly care is expensive. However, there are resources available to help lessen the out-of-pocket costs.
In Rhode Island, Medical Assistance is the Medicaid program that pays for the cost of a nursing home facility for qualified individuals. Statewide, the majority of nursing home residents receive Medical Assistance. If you qualify, Medical Assistance may pay for long-term care in a nursing home, some in-home care, or assisted living in a limited number of circumstances. Although most nursing home residents receive Medical Assistance, most start out as “private pay” residents. The half million dollar question is this: Just when should the resident apply? The answer is: When the resident is eligible—and not before or after. This is the essence of what an Elder Law attorney should be able to do. No one—ever—can advise a resident when to apply without going through a detailed review of the resident (and spouse’s) assets. Generally, there will be a “spend down,” but the money spent doesn’t necessarily have to be spent on the nursing home—especially if the resident is married. I advise people to never try to apply without professional help, because the resident could be locked into a “penalty period” of ineligibility. It is important to recognize that applicants for Medical Assistance are penalized for gifts given in the five-year period before their applications are filed. Here, we are talking about giving money or property as gifts, not the American Girl doll you gave to your granddaughter this past Christmas. The penalty is harsh and unforgiving.
Long-Term Care Insurance
If you find yourself in a position where your resources will likely disqualify you from Medical Assistance, but the cost of nursing home care still sounds unaffordable, long-term care insurance may be an option to consider. People who purchase long-term care insurance pay monthly premiums in exchange for help paying for long-term care when they are no longer able to care for themselves. The advantage of long-term care insurance is that it doesn’t only have to be used for nursing home care. Elizabeth O’Brien from the Wall Street Journal’s “MarketWatch” reported that 50% of industry-wide claims under long-term care insurance policies went to pay for home care in 2011, 19% paid for assisted living fees, and 31% for nursing home care. As with any insurance, it is important to research the product and carefully review the terms before purchasing the coverage. Purchasers should look for “inflation protection,” be conscious of the pay-out term, and go with a company with a proven track record of holding rates steady.
For war-time veterans, pension plans are available through the Veterans Benefits Administration. Due to backlogs, the timeframe for having an application approved may be lengthy, but it is a resource that should not be overlooked. Under the VA’s Improved Pension, three pension levels exist: the Aid & Attendance Pension, the Homebound Pension, and the Basic Pension. Although the eligibility requirements differ for three pension levels, each includes financial and medical thresholds. War-time veterans over the age of 65 are classified as “permanently and totally disabled” regardless of their physical state and must meet only a financial threshold to qualify for the Basic Pension.
One Size Does Not Fit All
Seniors do not have to go it alone—there is help out there. Each individual has a different set of circumstances and needs, and, remember, one size does not fit all.