Tuesday, October 23, 2012

How to Pay for Alzheimer’s Nursing Home Care?

Moving a loved one into a nursing home is not an easy decision. We want to make sure our loved ones receive the best in medical care and are as comfortable as possible with the transition. There are numerous factors to consider when a family member can no longer live alone because of medical tragedies such as Alzheimer’s, a stroke, a heart attack, or Parkinson’s disease. Not only will we consider the care facility’s services and environment, but the decision will also involve finances: What is affordable? How long will our savings last with all the economic turmoil? Can we consider qualifying them for government benefits?

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How Can I Pay for Alzheimer’s Nursing Care?

Alzheimer’s nursing homes can cost considerably more than other nursing homes. It is important to understand the costs involved before agreeing to stay. Approximately 50% of patients pay for nursing home costs out of their own savings, yet there are several other ways to finance nursing home care:
  • Medicare will pay for some costs under some conditions, however, only a Medicare-certified skilled nursing home will qualify. Medicare offers supplemental personal insurance called Medigap.
  • Medigap is private insurance that pays for gaps in Medicare coverage and will pay for most nursing home costs.
  • Medicaid is a state and federal program that will cover most nursing home costs provided the resident has limited income and assets. If a senior is paying for costs from their own savings, they usually become eligible for Medicaid when those funds are spent down.
  • Long-term care insurance is a private insurance policy specifically designed for those who are in need of long-term health services.
  • Employer-based health plans may also cover costs. Employers and insurance brokers can offer more information about specific policies.

Cost of Nursing Care for Alzheimer’s

Some nursing homes (or skilled nursing facilities) provide dementia and/or Alzheimer’s care in a separate wing or unit. The 2010 MetLife Mature Market Study indicates that 35% of the nursing homes surveyed provide this type of care with average daily rates of $228 ($83,220 annually) for a private room and $206 ($75,190) for a semi-private room.

In 2011, the national average amount paid for a private room in a skilled nursing facility was $239 / day or $7,170 / month. 

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Medicare and Alzheimer's Care

There is not a simple answer to the question "does Medicare pay for Alzheimer's care?"  Medicare, like most health insurance, does not differentiate Alzheimer's and dementia care from other conditions such as heart disease.  Instead, Medicare has certain policies with regards to when and how much it will pay for care.  Actually, it is not exactly true, since Medicare does not pay for long term care of Alzheimer’s patients by default at all —it is excluded.

Yes, this is confusing, but the confusion is easier to understand if you know that Medicare does pay for rehabilitation, no matter what are the originating conditions. So, if a senior citizen enrolled in the traditional Medicare plan is hospitalized for a stay of at least three days and then is admitted into a skilled nursing facility, Medicare may pay for a while. The maximum number of days one can receive is 100 consecutive days. However, the payment period could be less than 100 days based on the patient’s response to the rehabilitation—improvement is required, otherwise Medicare will determine that the condition is a long term care need and stop funding. Plus, there is a deductible of about $120 per day. So, this Medicare coverage is really based on the possibility of rehabilitation. Since diseases like Alzheimer’s have no known cure today, rehabilitation is not considered possible; therefore Medicare will offer no assistance for payment.

So, as example, Medicare may pay for 100% of the cost of nursing home care if it is medically necessary for 20 days and 80% of the cost for an additional 80 days.  Medicare does not pay for custodial or personal care that is provided in an assisted living residence but will pay for medical care provided in that location.  The same applies for home care and adult day care; personal care services, or assistance with the activities of daily living which is typically necessary for Alzheimer's patients is not covered but medical care is covered.

Medigap and Alzheimer’s Care

Medigap or Medicare Supplementary Insurance does not specifically provide additional benefits for Alzheimer's patients but does offer supplemental assistance.  For example, these policies usually pay the 20% of the cost of nursing home care that Medicare does not pay.

Medicaid and Alzheimer’s Care

Medicaid is a joint federal/state health insurance program providing medical care benefits to low-income Americans who meet certain requirements. Nursing home care is covered through Medicaid, but eligibility requirements and covered services vary widely from state to state.

Yes, Medicaid will cover all the nursing home and medical expenses of a senior needing nursing home care, if the senior meets both the income and asset limits of the Medicaid program. Each state has a different set of rules, but generally a single or widowed person can keep only $2,000 in total assets and still qualify for Medicaid and the rest must be “spent down.”  Again, this varies—for example, in Ohio, it’s $1,500 and in Missouri it’s $999—but normally it’s about $2,000.  The spend down process includes nearly all assets.  The exempt assets are:
  • Home (equity up to $500,000) if “intent to return” is established
  • Personal belongings and household goods
  • One car or truck
  • Burial spaces and certain related items for applicant and spouse
  • Irrevocable pre-paid funeral contract
  • Up to $1,500 of face value life insurance or less; if the face value exceeds $1,500 the cash value is countable as a resource for payment

All other assets are generally non-exempt and are countable as resources available for payment.  Basically, any item of value that can be turned into cash is a countable asset unless it is listed above as exempt.  Non-exempt items would include:
  • Cash, savings and checking accounts
  • Credit union share and draft accounts
  • Certificates of deposit
  • US Savings Bonds
  • IRAs, 401(k)s, Keogh plans, 403(b) and all other defined compensation plans
  • Pre-paid funeral contracts that can be cancelled
  • Trusts (depending on the terms and conditions of the trust)
  • Real estate (other than primary residence)
  • More than one car
  • Boat or recreational vehicles
  • Stocks, bonds and mutual funds
  • Land contracts or mortgages held on real estate sold

You may think, “Just give it to your kids and it will be fine.”  This is actually a major rule violation for Medicaid called an “improper transfer.”  There are very strict gifting rules for Medicaid eligibility and it must be done correctly. Gifts made after the enactment of the February 8, 2006 Deficit Reduction Act are subject to a “five year look back period.”  This means that if the gifts were made any time in the previous 60 months, the state would not recognize the gift and would expect the family to give the money back to pay for care. 

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Long-Term Care Insurance

With nursing home care costing about $80,000 a year, and the government periodically threatening to cut Medicaid payments for long-term care, many people have turned to long-term care insurance as a way to guarantee payment of nursing home care.

Long-term care policies must be purchased before the policy-holder needs long-term care. The time to buy is as soon as possible after an Alzheimer's diagnosis. Unfortunately, some long-term care insurers do not sell policies to people with pre-existing conditions, such as Alzheimer's disease. Be sure to examine excluded conditions before you buy.

Long-term care insurance rarely covers the entire cost of care for the remainder of the person's life. Most long-term care policies offer benefits that range from $50 to $200 a day, with a maximum number of days stipulated in the policy.

The cost of long-term care insurance varies tremendously depending on:
·         The age and health of the policy-holder. The older and sicker you are, the more expensive the coverage.
·         The daily pay-out. The more money, the more expensive the coverage.
·         The pay-out duration. The longer, the more expensive.

Please do your homework properly, before you buy insurance. Put attention to the following variables:
·         Most policies have deductibles and elimination periods. You must pay a certain amount before the policy pays anything, and you must pay for a certain period of time before the policy coverage begins.
·         Some policies have fixed premiums. In others, the premiums increase annually.
·         Some policies require continued payment of premiums while the policy-holder is in long-term care collecting benefits. Others have "premium waiver" that allows policy-holders to stop paying premiums while they are receiving benefits.
·         Some policies pay-outs offer inflation protection. Others do not.

Viatical Settlements

In recent years, special brokerage firms-- viatical settlement companies--have made a business of buying life insurance policies for cash. The viatical firm has a physician examine the policy-holder, assesses how long the person is likely to live, and then offers to buy the policy for an amount that gives the policy holder immediate cash for long-term care while still living, and at the same time, gives the brokerage and its investors a return on the investment. Viatical settlements typically range from less than 60 percent of the death benefit if the person appears to have more than two years to live, to around 90 percent if the person appears likely to die within a few months.

Say the policy death benefit is $100,000, and the viatical company believes the person's life expectancy is four years. The firm might offer $45,000. The family can then use this money to pay for nursing home care, and the brokerage collects the $100,000 when the person dies. If the person dies sooner, the brokerage makes more money. If the person survives longer, the firm loses money.

Sources and Additional Information:

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