Long-term care is financed through a variety of means. A patient’s personal funds may be used, including Social Security, retirement plans, savings and long-term care insurance. Private organizations such as veterans’ groups, trade unions or fraternal organizations may provide financial assistance, and aid is also available through the Medicaid and Medicare programs. However, not all facilities accept Medicaid or Medicare payments.
Nursing home care costs can range from $3,000 to over $6,000 a month, depending upon the services needed by the patient. The financial impact of long-term care can be almost as formidable as the illnesses that necessitate nursing home admission – primarily because few people are prepared for it. However, the information presented here is intended not only to assist those currently dealing with financing long-term care but also to encourage others to plan for the future.
Patients who finance the cost of care on their own, without assistance from government programs, are known as “private pay” patients. These individuals pay for their care through personal funds or a long-term care insurance policy.
Long-term Care Insurance. Private insurance polices are available from a variety of sources, including some employers and insurance companies. The cost of the coverage is based on the applicant’s age, current health and the benefits purchased. Policy benefits include a daily or monthly benefit to cover the cost of care, the length of time those benefits are payable, a deductible (called an elimination period), inflation protection (optional) and coverage outside of a nursing home (optional). Care outside of a nursing home can include an assisted care living facility or the insured’s own home.
Long-term care insurance policies will pay for care once assistance is needed with activities of daily living (bathing, dressing, eating, etc.) or if assistance is needed due to a cognitive loss.
To provide a cost perspective, the premium for a policy that would cover, for example, $130 per day for three years of care after a 90-day elimination period is approximately $810 per year at age 50. At age 65, the same policy costs $1,700 per year, and at age 75, $4,500 per year. In this particular sample policy, a 5 percent inflation protection was built into the plan. Inflation protection helps keep policy benefits in line with the rising cost of care and can add a significant amount to premiums.
Long-term care insurance policies sold in Tennessee cover all levels of care in a nursing home and can also cover care in an assisted care living facility and may even cover care in the insured’s home. It is important to make sure that the policy is comprehensive if you would like the option of staying at home.
Long-term care can be very costly, and many Americans do not plan ahead financially for their long-term care needs. In recent years, the federal government has promoted long-term care insurance, as it is an excellent way for citizens to protect themselves from the expenses associated with long-term care. In fact, legislation passed in 1996 by Congress gave certain tax incentives for the purchase of long-term care insurance. The federal government even began offering long-term care insurance to federal employees as a benefit.
The Tennessee Health Care Association recommends consumers use the following checklist as a guide to purchasing long-term care insurance:
- How long is the deductible period (elimination period)? It is not recommended to choose more than 100 days. Also, understand how these days are counted if you are receiving care at home. Must you receive care from a home care agency for a day to count toward your deductible? Are you comfortable paying for this length of care out of pocket?
- What amount of money does the policy pay for your care once you become ill? Does this benefit grow over time? Is inflation protection built in to the plan? Be sure that you know the current cost of care in your area.
- How long will the benefits last once you need care? This is commonly called the “benefit period.” Are your benefits based on a “pool of money” or on a certain number of years?
- Has the company ever had a rate increase on current insurance plans? If so, when was the increase and how much? The policies can have a rate increase in the future so be sure to feel comfortable with the insurance company’s financial strength.
Copies of a brochure titled “What Consumers Need to Know about Private Long Term Care Insurance” can be requested by contacting the American Health Care Association (AHCA) at (202) 842-4444 or visiting the organization’s consumer Web site, www.longtermcareliving.com/financial_information. Remember, finding a good policy will take some effort, but it will certainly be worthwhile, as it will offer you and your family financial security and peace of mind.
Should you have questions about the companies authorized to sell long-term care insurance in Tennessee, contact the state Department of Commerce and Insurance at (615) 741-4955 or visit state.tn.us/commerce. And, please note that just because a company is authorized to sell long-term care insurance in Tennessee does not mean it is endorsed by the state.
Medicare is a federal health insurance program administered by the Centers for Medicare and Medicaid Services (CMS). It’s available for anyone over the age of 65, certain disabled individuals under 65 and people of all ages with end-stage renal disease (permanent kidney failure requiring dialysis or a kidney transplant).
Medicare is not a long-term care program. It covers nursing facility care for those individuals who are recovering from serious illness or injury, but only for a limited time. Medicare has Part A (hospital and skilled nursing insurance), Part B (medical insurance), Part C (Medicare Advantage Plans) and Part D (prescription drug coverage).
Medicare Eligibility Requirements. Nursing home coverage under Medicare, though very limited, falls under Part A. Medicare will cover nursing home care only if the patient receiving the care needs the highest level of care, called skilled nursing. The patient must also have spent at least three consecutive days in a hospital not more than 30 days prior to nursing home admission. A physician must certify that skilled nursing services are needed for the same or related illness for which the patient was hospitalized.
Medicare Benefits. Medicare pays for an eligible individual’s care in a skilled nursing facility for up to 100 days. Under the program, the first 20 days are covered at 100 percent. For the remaining days, the patient must make a daily coinsurance payment. The co-payment for 2009 is $133.50 per day. If the patient remains in the nursing home longer than 100 days Medicare will make no further payments during that spell of illness. A spell of illness refers to the condition for which a patient is initially hospitalized. If, after the 100-day coverage limit, a patient remains well enough not to need skilled care for at least 60 days, and then the patient’s condition declines to the point that hospitalization again is needed for at least three days, it is considered another spell of illness. This situation makes the patient eligible for another 20 days of full coverage and 80 days of partial coverage by the Medicare program.
- A semi-private room
- Meals, including special diets
- Regular nursing services
- Rehabilitation services
- Activities programs
- Medically-related social services
- Basic haircuts
- Certain over-the-counter medications furnished by the facility
- Facility maintenance
- Personal laundry
- Routine personal hygiene items
- Certain medical supplies
Services not covered under Part A include:
- Personal convenience items
- Private duty nurses
- Extra charges for a private room
Part B. If a patient chooses to participate in the Part B medical insurance program, Medicare may help pay for covered services a patient receives from a physician while in a skilled nursing facility. Under certain circumstances, Part B may cover special services such as physical and occupational therapy. Medicare Part B does not cover:
Medicare Part B does not cover:
- Routine physical examinations and tests
- Routine foot care
- Eye or hearing examinations for prescribing or fitting eyeglasses
- Certain examinations
Part C. Medicare Part C, also known as Medicare Advantage, is available to Medicare-eligible recipients as an alternative to coverage under original Medicare Parts A and B. Medicare Advantage incorporates the cost-saving measures of “managed care” in a manner that usually takes the form of a health maintenance organization, preferred provider organization, Medical Savings Account or other type of health plan. Medicare Advantage managed care plans save out-of-pocket costs traditionally associated with original Medicare Parts A and B. In most of these plans, there are often extra benefits and lower copayments than in the original Medicare plan. However, participants may have to see doctors that belong to the plan or go to certain hospitals to get services.
Medicare Advantage Plans typically include:
- Medicare Health Maintenance Organization (HMOs)
- Preferred Provider Organizations (PPO)
- Private Fee-for-Service Plans’
- Medicare Special Needs Plans
Part D. Everyone on Medicare has access to prescription drug coverage under the Medicare Part D program. Medicare Part D prescription drug coverage is insurance. Private companies provide the coverage, and beneficiaries choose their prescription drug plans, or PDPs. Medicare beneficiaries pay co-payments on a sliding scale, with financial assistance available for certain low-income individuals.
There are some nursing home patients, however, who qualify for both Medicare and Medicaid, an assistance program designed by the federal government and administered by individual states. In Tennessee, it is referred to as TennCare. These patients are known as “dual eligibles.”
“Dual eligibles” residing in Tennessee nursing homes receive prescription coverage through Medicare Part D. “Dual eligibles” who live in nursing homes pay nothing out of their own pockets for prescription drug coverage, unlike other Medicare beneficiaries. “Dual-eligible” patients can change their prescription plans once a month, if needed, and whenever they change nursing homes.
Questions about Medicare Part D can be directed to local nursing homes or pharmacy providers.
In Tennessee, Medicare pays for the care of around 15 percent of all nursing home patients. Private Medicare supplemental insurance policies – sometimes called Medigap policies—are designed to pay only deductibles and co-payments on services that Medicare will allow. If Medicare does not pay for nursing home care, neither will the supplemental insurance policy.
For more information on the Medicare program, please visit www.medicare.gov, the “Official U.S. Government Site for People with Medicare.”
The majority of nursing home patients in Tennessee receive government assistance through Medicaid to pay for their care. In fact, approximately 65 percent of the state’s nursing home patients receive Medicaid benefits.
Medicaid is a state and federal program designed to provide health care for low-income individuals. Tennessee’s Medicaid program is known as TennCare. The program originally was not designed to serve the elderly long-term care population; however, currently it is the primary method of financing nursing home care for those individuals who cannot afford to pay for it.
Medicaid Eligibility Requirements. Medicaid nursing home patients must meet two requirements:
- Financial eligibility
- Medical eligibility
Financial Eligibility. In Tennessee, an individual’s income must be equal to or lesser than 300 percent of Supplemental Security Income (SSI) to qualify financially for Medicaid. For the year 2009, that amount is $2,022 per month. Assets (excluding the home) must be less than $2,000 for an individual and $3,000 if a couple is in a nursing home at the same time.
To establish financial need, applicants must collect and document the following information:
- Income from all sources, including Social Security, retirement plans and pension programs, interest on bank accounts, rental property income, etc.
- All assets, including cash on hand, real and personal property, cars, savings accounts, certificates of deposits (CDs), cash value of life insurance policies, stocks and bonds, and any other investments.
In addition, applicants must submit their Social Security number and proof of citizenship. However, Medicaid applicants or beneficiaries who are also receiving Supplemental Security Income (SSI) or who are Medicare recipients are currently exempt from this proof of citizenship requirement.
Applicants must contact their county office of the Tennessee Department of Human Services (DHS) to set up an appointment to file a Medicaid application. State officials recommend that the application be made at least two months before a private-pay patient’s finances are expected to reach Medicaid level as the approval process may take the full 45-day period allowed by law.
Qualified Income Trusts. In Tennessee and about 20 other states, there is an option available to those individuals who cannot afford nursing home care but whose monthly incomes are above the Medicaid cutoff for assistance. These individuals can set up qualified income trusts, also known as Miller Trusts.
A trust is simply a special type of bank account set up through a legal document where all of the money or proceeds from that account are managed to benefit an individual, known as the beneficiary. The Miller Trust allows an individual to put his income into a trust for his benefit and still qualify for Medicaid. The income in the trust does not count in determining Medicaid eligibility under the income standard. Therefore, the individual whose income is over the Medicaid nursing home income limit may become eligible.
The Medicaid recipient’s nursing home and other expenses are paid from the trust, with the remaining balance being paid over to the state after the Medicaid recipient passes away.
There are many rules governing Miller Trusts. Individuals needing to set up such a trust should seek help from a long-term care ombudsman or through legal services.
Spending Down. Many of the patients in Tennessee’s nursing homes have too much money in savings, investments or other assets to qualify for Medicaid when first admitted to a facility but eventually spend this money on nursing home care and become financially eligible, provided their monthly income meets minimum requirements.
In the past, this “spending down” of personal assets often left the patient’s spouse destitute. Now, laws provide financial protection for the spouse who remains at home. Currently, a patient’s spouse may keep at minimum $1,821.25 a month of their combined income. Larger amounts, up to $2,739 a month, may be allocated to the spouse in certain circumstances. The amount the spouse may keep usually increases annually. Federal and state laws allow the spouse to keep half of the couple’s assets at the time of nursing home admission, as well as their home and furnishings – unless that half is more than $109,560. This is the maximum amount that may be assigned in any case to the community spouse. If that half is less than $21,912, money from the other spouse’s half is shifted so that the remaining share will total $21,912. If the couple’s combined assets are less than $21,912, the spouse at home may keep the entire amount, as well as their home and furnishings.
Estate Recovery. Tennessee is required by federal law to have an “estate recovery” program. Such a program mandates that the state recover funds from the estates of nursing home patients who have had their care paid for by TennCare – Tennessee’s Medicaid program. To be subject to the state’s recovery program, an individual must have been 55 or older when receiving services funded by the state health care program.
Tennessee cannot recover the estate until the patient passes away. Even then, there are other exemptions from estate recovery. If there is a surviving spouse, for example, TennCare will not recover from the estate until the time of the surviving spouse’s death if the spouse requests an exemption and provides documentation of proof of marriage.
Also, if there is a minor child under the age of 18, TennCare will not recover from the estate until the child reaches the age of 18. The child or his representative must request an exemption to the recovery and provide a copy of the child’s birth certificate as proof of relationship.
And last, if there is a disabled child who became disabled prior to the age of 18, TennCare will not recover from the estate until the death of the disabled child. The disabled child or his representative must, again, request an exemption and provide a copy of the child’s birth certificate. A copy of the social security disability determination providing disability and onset prior to the age of 18 must also be provided.
Many individuals transfer or “gift” their assets to become eligible for Medicaid and to protect their homes and other possessions that could be subject to estate recovery. Federal law imposes strict rules on U.S. residents seeking to transfer their assets, such as their homes, to children or others in order to meet income-eligibility requirements for Medicaid.
Currently, the “lookback” period into an individual’s most recent asset transfer is five years. This means that when a patient enters a nursing home and applies for Medicaid coverage, the government will “look back” five years to see if an asset transfer took place. If an improper asset transfer did take place, a penalty will be imposed.
The penalty phase begins on the date the individual qualifies for Medicaid coverage rather than the date of the transfer. The penalty phase is calculated by taking the value of the asset transferred and dividing it by the average monthly cost for nursing home care, as determined by the Tennessee Department of Human Services. For example, if the average cost of nursing home care is determined to be $3,000 per month and if the applicant or his spouse transfers assets worth $30,000, that amount is divided by $3,000/month and results in a 10-month period of ineligibility. This penalty period would begin on the date the patient becomes eligible for Medicaid coverage, not on the date of the transfer.
Once the 10-month period of ineligibility in this example has passed, the patient will then become eligible for Medicaid assistance. This means the patient or family would be responsible for the cost of services provided during their period of ineligibility.
More information about estate recovery can be found at the Bureau of TennCare Web site, state.tn.us/tenncare. Please note that any estate recovery actions taken are by the government, not individual nursing homes.
Medical Eligibility. To determine medical eligibility for Medicaid, applicants must have a Medicaid-approved examination called a pre-admission evaluation (PAE) and a mental health screening (pre-admission screening and annual resident review, or PASARR). The PAE determines the level of care a patient needs and whether the patient meets Medicaid’s medical criteria. The PASARR determines if the patient has any mental illness or mental retardation that requires special treatment. If so, the applicant cannot be admitted to a nursing home. If the Department of Health approves the applicant’s PAE, the applicant is medically eligible for Medicaid.
Medicaid Benefits. Medicaid will pay for nursing facility care for those both financially and medically eligible. Medicaid beneficiaries, however, do contribute all of their income to the cost of their care, with a few exceptions: the cost of a health insurance premium, the cost of certain medical services not covered by Medicaid (such as limited podiatry services, for example) and $40 for personal needs.
The Tennessee Department of Veterans Affairs (VA) provides care in its own facilities to veterans who need Level 1 and Level 2 nursing care. Veterans Homes are located in Murfreesboro, Humboldt and Knoxville. The VA also provides long-term care benefits to veterans through contracts with community nursing homes. Beds are available to all veterans on a space-available basis. Contact the Tennessee Department of Veterans Affairs at (800) 827-1000 for more information or visit state.tn.us/veteran.