Paying for Assisted Living
As more Baby Boomers (currently 77 million strong) begin to slide into retirement, the term “assisted living” is going to be on the lips of everyone from financial planners to family physicians.
Assisted living gives older adults a safe, sanitary and supervised living space to spend their sunset years. The number of Americans with an assisted living facility in their future is on the rise. The U.S. Census Bureau estimates that the population of Americans 85-years-and-older will grow by 33% by 2010.
In addition, the U.S. Census Bureau estimates that approximately 6.5 million older people currently need assistance with activities of daily living. The Bureau reports that number is expected to double by 2020.
With great numbers, however, comes great financial responsibility. How, after all, are people paying for assisted living services? Let’s take a look:
What Does Assisted Living 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. Read more about assisted living costs.
How Can You 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 pay for assisted living.
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 for those who have a policy with a few restrictions.
For example, most long-term care insurance policies won’t cover the costs unless you are unable to perform two or more “activities of daily living” (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 yours—to see if your 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 care in an unlicensed facility or in your home. Better 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, like your home.
In some cases, veterans benefits can cover the costs of assisted living programs. To qualify, you’ll need your 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 care, in some cases, Medicaid will. Specifically, Medicaid may pay for an assisted living stay of 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 physical condition hasn’t improved during your assisted care facility 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.
Find Assisted Living
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. Browse our comprehensive directory to find assisted living communities near you.
Written by senior finance expert Brian O’Connell.