Paying for Assisted Living

As more Baby Boomers (currently 77 million strong) enter retirement, their adult children will quickly learn what the terms independent living and assisted living mean.

An assisted living facility is a community that provides assistance with activities of daily living while offering seniors a safe and supervised living space where they can remain independent. The number of Americans who will join an assisted living facility is on the rise in many states. According to the Long-Term Care Services in the United States:  2013 Overview report produced by the National Center for Health Statistics, Washington, Oregon, Utah and Minnesota are among the states which have more residents in assisted living facilities above the national average. States which are below the average include Nevada, Texas, and Georgia.

In addition, the U.S. Census Bureau estimates that approximately 6.5 million older people currently need assistance with activities of daily living (ADLs). The Bureau reports that number is expected to double by 2020.

Faced with the reality of parents living longer and likely needing to join an assisted living facility, how can families pay for their care. Let’s take a look.

What Does Living in an Assisted Living Facility Cost?

The Census Bureau estimates that, on average, the per-diem rate for assisted living in a private room is about 60%-70% of the cost of a similar-sized room in a nursing home. That could mean a bill of between $50 and $120 per day, and a good-sized case of sticker shock for potentially millions of Americans. On our assisted living costs page, we have provided a helpful breakdown of the costs by state. assisted living costs.

How Can Families Pay For Assisted Living?

There are several sources of funds commonly used for paying for assisted living: Private funds, long-term care insurance or sometimes veterans benefits. Private funds can come from personal investment portfolios, like 401k plans or Individual Retirement Accounts (IRA). Many people sell their homes, using equity that has built up over their lifetime, to fund their time at an assisted living facility.

Seniors who do not want to sell their home may consider paying for services through a reverse mortgage, where long-time homeowners essentially borrow against the value of their home. The U.S. Department of Housing and Urban Development has a good analysis of reverse mortgages.

Long-term care insurance, an umbrella term for insurance that covers nursing home care, home-based health care and assisted living health care in addition to other medical services, can help shoulder the cost of assisted living services for those who have a policy with a few restrictions.

For example, most long-term care insurance policies won’t cover the costs unless the policy holder is unable to perform two or more ADLs. Some examples of ADLs include bathing, dressing, eating, getting from a bed to a chair, using a toilet and walking. Some insurers may evaluate with a physician of their choice—not the policy holders—to see if their condition qualifies for coverage.

The type of long-term care insurance policy is critical, too. For instance, a “facility-only” policy covers care received in a licensed assisted living facility or skilled nursing facility but not the care provided in an unlicensed facility or a family member’s home. It is recommended to get an integrated home care policy with 100% protection for care received either in a licensed assisted living facility or skilled nursing facility, or in an unlicensed setting, such as a family member’s home.

In some cases, veterans benefits can cover the costs of assisted living programs. To qualify, you parent will need their military discharge papers (copies are fine), a valid medical condition (like blindness—but the condition need not be life threatening) that comes with a doctor’s letter of validation, certain minimum financial asset conditions, and the filing of a formal application, called the Veteran’s Application for Compensation and/or Pension, VA FORM 21-526, Parts A, B, C, and D.

Does Medicaid Cover Assisted Living?

While Medicare won’t pay for assisted living services, in some cases, Medicaid will. Specifically, Medicaid may pay for a respite stay at an assisted living facility for a limited duration (mostly 90 days or less). But there are factors that could reduce or stop Medicaid from paying during that time period. For example, your parent’s physical condition hasn’t improved during their stay.

Payment statutes vary from state to state, and with Medicaid, financial help with assisted living costs is highly needs-based, i.e. the less money you have, the better chance you have.

Paying for assisted living is often seen as a challenge, but with the right amount of planning and foresight, assisted living can be an affordable option for many seniors.