In an era when people are saving less money for retirement than in previous generations, older adults need to ask themselves what financial strategies they have in place for a senior living if they decide to move to an assisted living community, or need memory care down the road.
Costs can vary widely depending on location, whether you opt for a standard or luxury residence, the types of amenities the community offers, and the level of assistance you desire or require.
Here are six smart financial strategies for assisted living and memory care in 2019:
- Long-term Care Insurance: While long-term care insurance (LTCI) appears to be a natural hedge against a future possibility of becoming ill or disabled, it shouldn’t be your primary means of funding assisted living or memory care. Here’s why:
- LTCI premiums can be as steep as the cost of care itself.
- What is covered varies by policy. For example, a “facility-only” policy covers care in a licensed assisted living facility or SNF, but not in your own home.
- There is usually a waiting period before someone is able to access funds. The shorter the elimination period you select, the more expensive the premiums.
- Insurance companies can change the premiums or the benefits.
Also, some LTCI insurers may ask for a physician evaluation — of the insurance company’s choice — to see if a senior’s condition qualifies for coverage, which may be determined in part by their ability to perform two or more activities of daily living (ADL).
- Life insurance. Many life insurance policies have a provision for long-term care benefits, which can be less expensive than a long-term care policy. Additionally, if you or your parent has been paying premiums on a life insurance policy for more than a decade, you may be able to tap the policy’s built-up cash value.
However, if you borrow or withdraw more than what you’ve already paid in premiums, you’ll owe tax. Talk with a financial advisor before taking this step.
- Deferred Long-term Care Annuity. Whether or not a senior qualifies for long-term care insurance, they can still purchase an annuity. A deferred long-term care annuity, available to people up to age 85, provides a monthly income in exchange for a single premium payment. You can access the long-term care fund immediately upon payment of the premium, but must wait until a specified future date for the income stream to begin. If you don’t end up using the long-term care fund, you can pass it on to your heirs.
- Veteran’s Benefits: Veterans and spouses of veterans may qualify for aid from the Department of Veterans Affairs. Although the VA does not pay the veteran’s housing costs, it may cover some of the services provided by an assisted living facility.
Known as Aid & Attendance (A&A), this benefit is a monthly, needs-based payment above and beyond the VA pension that can help cover the costs of long-term care. It is important to note that a veteran or surviving spouse may only receive Aid & Attendance or Housebound benefits, not both at once.
In order to be eligible for A&A benefits, a veteran must meet at least one of these criteria:
- Need assistance with activities of daily living (ADL) such as bathing, dressing, eating, or adjusting prosthetic devices
- Be bedridden
- Reside in a nursing home due to mental or physical impairment
- Have severe visual impairment, with a correction of 5/200 or less in both eyes, or concentric contraction of the visual field to 5 degrees or less.
Eligibility varies, but the benefits can be significant. Contact the Glendale area Veteran Affairs office to determine whether your loved one qualifies.
- Supplemental Security Income (SSI). SSI is a federal income program administered through the Social Security Administration. It’s distinct from Social Security, which is based on the number of years worked and the amount of tax paid.
SSI is also different from the similar-sounding SSDI (Social Security Disability Income), which is a payroll tax-funded, federal insurance program designed to assist people who are unable to work due to a disability.
SSI functions independent of your employment history. Even if you have never paid into Social Security, if your income is below a certain threshold and you’re 65 or older, you can receive SSI benefits. You can check a senior’s SSI eligibility.
Seniors may choose to use their SSI benefit to help cover the costs of senior housing. Some assisted living facilities will work out payment arrangements with individuals in need of care. These arrangements typically involve accepting the person’s SSI income as full payment.
- Home equity. By the time they’re seniors, most people have built up enough equity in their home that the simplest solution may be to sell the home and use the proceeds to pay for assisted living or memory care.
What about Medicare and Medicaid?
While many seniors believe these two government programs will cover their housing needs if they need some type of care, the reality is, neither program offers blanket coverage.
Medicare will only cover long-term care under certain circumstances:
- Medical care in a hospital
- Short-term stays in a skilled nursing facility (SNF)
- Nursing home care — which does not include activities of daily living (ADL) such as bathing, dressing and eating
- Hospice care
- Home health care, including physical and occupational therapy as medically prescribed.
Although Medicare will not cover the cost of an assisted living residence, it will cover qualified health care costs that are incurred while a senior resides in an assisted living community. Financial strategies for assisted living and memory care can include Medicare, but not rely on it.
There will typically be out-of-pocket copayments as well, unless the senior has additional insurance or another form of financial aid that covers these charges. Therefore, Medicare is a temporary or partial resource, not a long-term subsidized housing solution.
Because federal and state laws affect Medicare’s various plans, it’s essential to know what coverage you have. Medicare.gov explains the different types of coverage simply, and provides an easy way for you to check whether your service or test is covered.
What about Medicaid? Medicaid provides health coverage to more than 7.2 million low-income seniors who are also enrolled in Medicare. Services that are covered by both programs are paid first by Medicare, with Medicaid funding the difference, up to each state’s payment ceiling.
However, Medicaid generally does not pay for assisted living, unless the cost is less than that of a nursing home. In these situations, a Medicaid Waiver funds the needed services.