How to Pay for Assisted Living
- Wondering how to pay for assisted living? You're not alone. Keep reading to learn more about the options available based on your income and insurance coverage.
Assisted living is designed for older adults who don't need 24/7 nursing care but still need some help with their daily activities. Unlike nursing homes, which are typically set up like hospitals, assisted living communities have homelike environments to make residents feel as comfortable as possible. In many cases, residents are encouraged to bring their own furniture and decorative items, allowing them to get the care they need without giving up their most cherished belongings. Although assisted living has many benefits, the median monthly cost of care is $4,300, making many older adults wonder how they'll afford the fees. The following guide explains how to pay for assisted living with government benefits, insurance coverage and other financial resources.
Assisted Living Fees
Assisted living communities typically use one of three pricing models. The first model is the fee-for-service model, also known as the a la carte model. Under this model, residents pay a flat fee for their room and board. If they want additional services, they pay a fee for each service. Choosing an assisted living community with a fee-for-service model is one way to manage your costs of care, as you'll only pay for the services you need instead of paying a higher price for services you won't use. One disadvantage of the fee-for-service model is that your costs may vary each month, making it difficult to plan your budget.
The second model is known as the all-inclusive model. Under this model, most services are available for one flat fee. A major benefit of this model is that your costs stay the same each month, preventing financial surprises that could derail your budget. The main drawback is that you may pay more at an all-inclusive facility than you would pay at a fee-for-service facility. You may also need to pay extra for optional services.
The third model is known as tiered pricing. Instead of charging a flat fee to every resident, assisted living communities with tiered pricing charge different prices for different levels of care. Under this model, a resident in the lowest tier would pay the lowest monthly fee while a resident who needs much more care would pay the highest monthly fee. If you don't need a lot of care, choosing a community with tiered pricing can help you save money, but be aware that your costs could go up if you develop a chronic illness and need to move into a higher tier.
How to Pay for Assisted Living With Medicaid
Although the federal government provides some of the funding for Medicaid, it's up to each individual state to determine how its Medicaid program is structured. Therefore, your level of coverage for assisted living will depend on where you live. Some states also have multiple Medicaid options, so you may or may not qualify for coverage based on your income, assets, age or disability status.
Some states have Medicaid waivers available for older adults who prefer to receive care in a community setting rather than moving into a nursing home. If you qualify for a waiver, you may be able to use your benefits to cover the cost of the care you receive in an assisted living community. To reduce the cost of administering their Medicaid programs, some states have started using managed care. Under this model, the state contracts with a private health insurance company to ensure that Medicaid enrollees receive a standardized set of benefits. Depending on where you live, you may be able to use your Medicaid managed care plan to cover the costs of assisted living.
Even if your Medicaid plan doesn't cover the entire cost of assisted living, it may cover the cost of some of the personal care you receive. Personal care services are covered because they can help older adults receive the care they need in community settings instead of in a nursing home or other institutional setting, saving Medicaid money.
State Benefit Programs
Some states have programs other than Medicaid available to help older adults cover the costs of assisted living. The type of assistance available depends on where you live and whether you meet the eligibility requirements for each program. In some states, assistance is available in the form of a cash benefit that can be used to pay for room, board and other assisted living services. A few states operate their own assisted living facilities and charge below-market rates, making this type of care more affordable. Your state may even have a program that increases the amount of your monthly benefits to ensure you have the funds to pay for assisted living.
Does Medicare Cover Assisted Living?
Original Medicare doesn't cover the cost of personal care, room or board at an assisted living facility. If you receive medical care at your assisted living community, however, your Medicare benefits may cover some of the cost. For Medicare to cover the cost of the medical services you receive, the services must be medically necessary. They must also be provided by providers who've agreed to participate in the Medicare program.
If you have Medicare Advantage instead of Original Medicare, your plan may cover some of the costs of assisted living. Medicare Advantage combines the basic benefits of Original Medicare with prescription coverage and coverage for extra services. Some plans cover "daily maintenance" as long as it's medically appropriate and delivered by a licensed provider in an in-home setting. Depending on the terms of your plan, an assisted living community may qualify as an in-home setting. The level of coverage depends on your plan, but you may be able to get help paying for transportation to medical appointments, light housekeeping and help with bathing and other activities of daily living.
Paying for Assisted Living With Social Security Benefits
The Social Security Administration doesn't offer direct coverage for room, board or other services provided at an assisted living facility, but you may qualify for an optional state supplement that helps you pay your costs of care. A supplement is an amount of money added to your regular Social Security benefits to help you pay for the services you need to maintain your independence. Depending on your state's requirements, you may be able to use an optional supplement to pay for room and board or cover the cost of some of the services provided by your assisted living community.
Financial Assistance for Veterans
If you served in the military, you may qualify for the Aid and Attendance Benefit offered by the Department of Veterans Affairs. This benefit increases your VA pension to help you cover the cost of getting help with activities of daily living. You may be able to use the Aid and Attendance Benefit to pay for some of the services you receive in assisted living.
To qualify, you must receive a VA pension and meet at least one of the following requirements:
- You need assistance with activities of daily living.
- You have limited eyesight.
- You're bedbound due to an illness.
How to Pay for Assisted Living With Long-Term Care Insurance
If you don't qualify for government benefits, you may be able to pay for assisted living with long-term care insurance. The key to using this approach successfully is to make sure you sign up for LTC insurance before you need it. Long-term care insurance is a type of insurance coverage that offers at least 12 consecutive months of care for any individual who has an ongoing disability or illness. A long-term care insurance plan typically starts paying benefits when you need help with at least two activities of daily living, such as bathing, getting dressed, eating or using the bathroom. Depending on the terms of your plan, this type of insurance may pay for personal care, rehabilitation services and other types of care.
Paying Out of Pocket for Assisted Living
If you don't have long-term care insurance or qualify for any type of state or federal government benefits, you may have to pay for assisted living out of your own pocket. Although assisted living is expensive, it's possible to cover your costs of care if you plan ahead.
The sooner you start saving, the more money you'll have available for assisted living when you need it. In 2019, the Federal Reserve conducted a survey to determine the average savings account balance of Americans in different age groups. Adults between the ages of 55 and 64 had an average balance of $57,800 while adults between the ages of 65 and 74 had an average balance of $60,400. With an account balance of $60,400, you'd be able to pay for just over 14 months of care at the median cost of $4,300 per month.
Home Equity Loans and Lines of Credit
If you have a lot of equity in your home, you may be able to take out a home equity loan or a home equity line of credit (HELOC) to help cover the cost of assisted living. Equity is the difference between the value of your home and what you owe on the mortgage. If your home is worth $400,000 and the mortgage balance is $200,000, you have $200,000 in equity. A home equity loan is a secured loan that uses your home as collateral. Taking out a home equity loan can help you access a large sum of money in a short amount of time, but remember that the lender can take your home from you if you stop making payments.
A HELOC is a line of credit that can be used like a credit card. You're approved for a certain credit limit, and if you need to use it to cover your expenses, you can access the money by writing a check or using a debit card tied to the account. HELOCs also use your home as collateral, so you may lose your home if you're unable to repay the amount of money you borrowed.
A reverse mortgage is another way to access the equity in your home and use it to cover assisted living and other expenses. With a reverse mortgage, the lender pays you every month, giving you access to a steady stream of cash. If you pass away, your estate will be responsible for repaying the loan, which may require them to sell the house. Keep this in mind if you plan to leave your house to one of your heirs.
You may also be able to take out a personal loan to cover some of your assisted living costs. Lending requirements vary by bank, but you typically need a good credit score and a steady source of income to show the bank that you can make the payments. If you're waiting on a lawsuit settlement to pay out or just need a little time to sell your house and use the proceeds to cover your living expenses, taking out a personal loan may be a good short-term option.
Help Planning for Assisted Living Costs
It's important to plan ahead for the day when you'll need assisted living care. Because there are so many options available, it can be difficult to determine the best course of action for your particular circumstances. Fortunately, there are many resources available to help you make good decisions.
Area Agency on Aging
Check with your local Area Agency on Aging if you'd like to talk to someone with extensive knowledge of the programs available to help older adults pay for ongoing care. Area Agencies on Aging provide referrals to outside agencies and make sure that older adults and their families understand the options available to them.
Geriatric Care Managers
Geriatric care managers are available to help you and your family plan for your long-term care needs. Some counselors have extensive knowledge of the financial resources available to help you pay for assisted living and other costs of care.
Elder Law Attorneys
If you have a complex financial situation, the benefits of consulting with an elder law attorney far outweigh the costs. This is especially true if you have a living trust or need help reviewing the documents for a reverse mortgage.
Elder Care Resource Managers
If you can't find a geriatric care manager with financial expertise, seek an elder care resource manager. An ERP has specialized experience helping people plan ahead for assisted living. They also understand the financial implications of moving to an assisted living community and can provide expert guidance to help you make sound decisions.