Senior Financial Planning: How to Pay for Assisted Living
Living at Glen Park is a wonderful way to enjoy all the comforts of home in your senior years, without the headache of maintaining a house. Our thoughtfully designed apartments, exceptional dining, and lively activities tailored to your loved one’s interests and abilities make Glen Park Healthy Living the ideal choice for affordable assisted living.
Of course, the key to worry-free senior living is smart financial planning, before you need the money. The annual Genworth Cost of Care Survey found the median cost of assisted living in the Los Angeles area was $54,000 in 2018.
Let’s look at the best ways to help make assisted living affordable.
What Do Medicare and Medicaid Cover?
People tend to think of Medicare and Medicaid in a single breath, like peanut butter and jelly. But the two programs, while complementary, address distinct aspects of senior health care and finances. And neither offers blanket coverage for assisted living, despite this misconception.
Medicare will only cover long-term care in certain circumstances:
- Qualified medical care in a hospital
- Short-term stays in a skilled nursing facility (SNF)
- Nursing home care (as long as the resident requires nursing care and not simply “custodial assistance” with daily needs such as bathing, dressing, and eating, which fall under assisted living)
- 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 incurred while a senior is living in an assisted living facility.
There will also usually be out-of-pocket copayments unless the Medicare recipient 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 and simply 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 Waiverfunds the needed services.
A California-Specific Program
In California, The Assisted Living Waiver Program (ALWP) serves seniors who need long-term assistance with personal care and household tasks.
The California Department of Health and Human Services requires participants in this program to contribute to their room and board costs. In 2019, this rate is approximately $1039 – $1059 per month, depending on a senior’s income.
Six Financially Savvy Ways to Afford Assisted Living
- 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.
- Long-term Care Insurance: Long-term care insurance (LTCI) can be tricky. While it appears to be a natural hedge against a future possibility of becoming ill or disabled, it’s not an all-inclusive solution. 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 an unlicensed facility or 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.
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.
- Supplemental Security Income (SSI). SSI is a federal income program administered through the U.S. Social Security Administration. It’s distinct from Social Security, which is based on the number of years worked and amount of tax paid.
SSI is also different from the similar-sounding SSDI (Social Security Disability Income), which is a payroll tax-funded, a 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.
- 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.
Just be aware that if you borrow or withdraw more than what you’ve already paid in premiums, you’ll owe tax. Talk with your financial advisor before taking this step.
- Housing Choice Voucher Program. More commonly known as Section 8,this low-income option, offered through HUD, enables low-income residents to rent “safe and reasonable” apartments or other accommodations. While the program is not senior-specific (that is, not contingent on age), many assisted living facilities to accept Section 8 payment.
- Sell the House. Finally, if your loved one has sufficient equity in their home, the simplest solution may be to sell the home and use the proceeds to pay for assisted living.