Who Pays for a Nursing Home?

And you thought college tuition was a budget breaker! How about $45,000 a year for the average nursing home stay? No low-interest student loans or scholarships here. So what's a typical, middle-income family to do? If your parents were fortunate enough and well-off enough to have purchased long-term care insurance then the financial hit will be minimal. But if they don't have it, which accounts for 98 percent of us, here's what you should know.

Medicare

Under very limited conditions Medicare will pay for some nursing home care costs for those who require skilled nursing or rehabilitation services. Here's a shocker: Medicare pays for less than 10 percent of all nursing home bills! Most people think Uncle Sam picks up the tab. Wrong.

If you are fortunate enough to have some of the bill paid by Medicare, then you've got to make sure that your parent goes to a home that is certified by Medicare. Not all are, so make sure you ask. Here are the five conditions your parent must meet before Medicare will pay for any care:

1. Skilled care is required every day as an inpatient.
2. Your parent has been in the hospital for three consecutive days, not including the day of discharge.
3. Admission to the nursing home is made within 30 days of the hospitalization.
4. Admission to the nursing home is for the same condition as was the hospitalization.
5. A physician must certify the need for skilled nursing or rehabilitative care.

If your parent meets all of these conditions Medicare may pay up to the first 100 days of your parent's nursing home stay. Even then, after the first 20 days Medicare will pay 80 percent of the bill, so hopefully your parents have a Medi-gap policy to pick up the other 20 percent. After the 100 days, you're on your own. Please pay attention to the words—limited, some, and may—there aren't any guarantees. Be sure to ask the hospital social worker to explain the conditions and terms to you.

Bottom line? Don't count on Medicare to pay your parent's nursing home bill!

Medicaid

Medicaid programs are run by the state, usually the department of public welfare or human services. Medicaid pays the nursing home costs for people who have a low income and limited assets. Today, Medicaid pays for seven out of 10 residents—it's why state welfare budgets are hemorrhaging.

Most people start out paying for nursing home care through their own savings and spend down to a point where they qualify for Medicaid. Every state has different rules for qualifying, so you should contact your local area agency on aging or welfare office to find out your state's eligibility requirements.

Some people think that you have to spend yourself down to poverty to qualify which means the spouse will lose his or her home and spend the rest of his or her life in poverty. But federal laws protect enough of your parent's assets so that the one living at home isn't forced into poverty.

There are lawyers who will show you how to qualify for Medicaid even if you have a high income. There are a number of steps you can take to protect your assets several years in advance of your parent needing nursing home care. Even though this may be legally correct, the ethics are very questionable. States will look back over a period of three to five years to see if you have transferred assets to intentionally misuse Medicaid. These state and federal funds are reserved for those who truly need the financial help. Gaming the system hurts us all in the long run. Rule of thumb: If somebody can afford to hire a lawyer to rework his or her finances to exploit Medicaid, that person can afford to take care of his or her parents without putting them on welfare.

Out of Your Pocket

Nearly half of all nursing home residents pay for their care out their own pockets. In 1996, private payments for nursing home care reached just over $30 billion. Half of all residents are discharged within three months while one in five are there for more than a year but less than three years. If an individual stays for a long period of time and spends all of his or her savings, that person usually becomes eligible for Medicaid.

Medi-Gap or Medicare Supplemental Insurance

Chances are your parents have been paying for a supplemental insurance policy to their Medicare. These policies are commonly referred to as Medi-gap policies because they fill in the gaps between what Medicare pays and whatever is the actual bill from a doctor or hospital. They will also help with the gap between what the nursing home charges and Medicare pays. But remember: At the most we're talking a 100 days of care if Medicare covers it. These Medi-gap policies do not pay the full bill.

Veterans Nursing Homes

My dad, a World War II veteran, calls me at least twice a year when he's paying his Medi-gap insurance policy and asks me, “Are you sure I need this? Can't I just go into the Veterans Home and then I won't have to pay anything?” And I always say, “No, Dad. There are millions of veterans out there just like you. There simply aren't enough beds. You have to qualify to get in and they're looking for people with pretty low incomes.” Even though the Department of Veterans Affairs provides long-term care services for thousands of veterans, it isn't free. See VA Health Care Benefits Package.

Medicare Managed Care

If your parent has opted out of the traditional, fee-for-service Medicare and into a Medicare managed-care plan, you should know that the managed-care organization must offer your parent the same benefits as those offered under traditional Medicare. This is the minimum the managed-care plan must provide. Check with your parent's plan to see if it covers anything more than the minimum.

Medicaid Waiver Programs

Most states have received waivers from the federal government to offer people who qualify for Medicaid and are certified as eligible for nursing home care a choice to either go into a nursing home or remain at home. If someone chooses to stay at home, the state will pay a large portion of the home health care and medical services your parent will need. Every state has its own set of rules. Call your local area agency on aging to find out how to qualify.

So there you have it. If you've learned anything, I hope it's that you are no longer among the misguided who think that Medicare covers your parent's nursing home stay.

Your entire family—parents and siblings—should have a serious discussion on how to financially prepare for nursing home care. If your mom is 85 years old, she has a 5050 chance of needing nursing home care. With those kinds of odds and the level of expense we're talking about, you can't afford to go merrily along hoping for the best. Some families are pitching in to buy long-term care insurance for their parents while they're in their 60s when it's more affordable. It's not such a high bill to pay when three or four family members are sharing in the cost.

Excerpted from The Complete Idiot's Guide to Caring for Aging Parents © 2001 by Linda Colvin Rhodes, Ed.D. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.

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