Paying For Assisted Living: Financial Assistance for Senior Living

10 Aug Paying For Assisted Living: Financial Assistance for Senior Living

Assisted Living Costs & Fee Structures

Most assisted living communities offer residents the choice of all-inclusive or fee-for-service pricing. All-inclusive means that a single monthly fee covers rent, meals and any additional services a resident chooses such as housekeeping or transportation. Fee-for-service means a resident pays only for those services they use. Typically, if a resident intends to use the full suite of services an assisted living residence offers, it is less expensive to choose the all-inclusive model. If a resident will only require certain services or will use outside assistance for certain services, then the fee-for-service approach offers better cost savings. A more detailed review of assisted living pricing models is available here.

In 2019, the projected, average monthly cost of assisted living nationwide is $4,000. Alzheimer’s and dementia care in assisted living (called Memory Care) costs, on average, an additional $800 – 1,200 per month, for a monthly total of $4,800 – $5,200. Costs for assisted living vary dramatically from state to state. In the South and Mid-West, the approximate average monthly costs are from $2,800 – $4,500. In the Northeast and on the West Coast, $4,200 – $6,050 per month is the norm. See a table of the average cost of assisted living by state.

Financial Assistance for Assisted Living

Medicaid and Assisted Living

Financial assistance from Medicaid for assisted living comes through several different types of Medicaid programs. The most common of which are Medicaid Waivers, also called Home and Community Based Services (HCBS) Waivers and 1915(c) Waivers. The number of states offering these waivers has increased rapidly in recent years, and assistance will possibly be available nationwide in the near future. However, some states are moving to a Medicaid managed care model and away from Medicaid Waivers. These states continue to provide the same level of benefits for assisted living, but do so as part of their managed care programs instead of through waivers. Another type of Medicaid program is referred to as State Plan Personal Care or Personal Assistance Services. This is a regular Medicaid benefit (an entitlement, meaning anyone who is eligible to receive services is able to do so) that pays for personal care and allows beneficiaries to receive that care in assisted living communities.

States are increasing the level of assistance they offer to persons in assisted living because this living environment is less expensive than skilled nursing homes, and therefore, less costly to the state. Having said that, Medicaid’s assisted living benefits are very inconsistent. For example, in some states, Medicaid pays for only personal care services in assisted living. In other states, the size of the community is regulated. Some states limit size to small, adult foster care-type homes, while other states limit assisted living to larger residences serving twelve or more persons. Still, other states have no regulations at all related to the number of residents. Another variation in policy relates to room and board. While Medicaid does not pay for room and board, states have found ways to assist. For instance, some states limit the maximum amount that can be charged or provide non-Medicaid assistance to Medicaid-eligible persons.

A complete list of states whose Medicaid programs help with the cost of assisted living and their eligibility requirements is available here. One can also learn more about qualifying for Medicaid assistance here.

Veterans’ Programs for Assisted Living

There is financial assistance for assisted living for veterans in the form of a pension called the Aid and Attendance Benefit. As of 2021, this program can provide assistance up to $1,936 / month for a single veteran and up to $2,295 / month for a married veteran. However, eligibility is complicated and there can be extensive wait times for approval. Details of the program, eligibility requirements, and tips for expediting the approval process are available here. Veterans who may be eligible for both Medicaid and Aid and Attendance might want to review this comparison of the two programs.

A second option for veterans can be used in independent living communities, but not assisted living communities. The Veterans’ Directed Care program gives the participating veterans considerable control and latitude with how their care funds are spent. Under this program, personal care attendants can be paid to provide assistance to veterans residing in independent living. It is worth noting that the phrase “independent living” means different things in different states. Here we are referring to a senior living community that does not provide personal care supportive services, but may provide recreational activities and group meals.

State Non-Medicaid Programs

Many states have recognized that providing financial assistance to frail, elderly individuals for assisted living is less costly to the state then having them go into a Medicaid-funded nursing home. This is usually preferable for the individual and their family as well. Unfortunately, not every state offers these programs.  These programs, which in many shapes and sizes, offering different benefits. However, all the programs in one way or another help to offset the cost of residing in an assisted living community. For example, some of these programs provide cash assistance that is not specifically designated for assisted living, but can still be used for that purpose.  Other programs provide a benefit supplement for beneficiaries who reside in assisted living instead of at home.  Still others are state-owned, assisted living residences with pricing well under market rates.

Original Medicare / Medicare Advantage

It is important to clear up a common misperception regarding Medicare’s coverage of assisted living costs. Medicare does not pay for assisted living, including the cost of room and board and personal care. However, medical expenses incurred at an assisted living residence may be covered by Medicare just as they would if the medical procedures occurred in a doctor’s office, hospital, or at one’s home.

Medicare Advantage (MA), on the other hand, may cover the cost of personal care assistance, as well as other supportive services in assisted living facilities. On April 2, 2018, the Centers for Medicare and Medicaid Services (CMS) announced the expansion of supplemental benefits to include supplemental healthcare benefits. (This is in addition to the supplemental benefits, such as hearing, vision, and dental, that many MA plans already offer.) In the past, benefits primarily meant for “daily maintenance” were not covered by Medicare Advantage plans. However, as of 2019, MA plans may provide “daily maintenance” benefits for those who reside in an in-home setting, given services are medically appropriate for the individual in question and are suggested by a licensed provider. While CMS does not offer a clear definition of an “in-home setting”, it is thought at the time of this writing that assisted living facilities are considered as such. Examples of possible services that may be available via one’s MA plan (and relevant to persons in assisted living) include medical and non-medical transportation and assistance with daily living activities, such as bathing, dressing, eating, laundry, and light housecleaning.

Social Security and Assisted Living

Social Security, in the strictest sense, does not pay for assisted living as Social Security benefits go directly to the individual. However, in roundabout ways, state-specific Social Security programs can help families with the cost of assisted living. Typically, states help by increasing or supplementing the amount of Social Security benefit the beneficiary receives if they reside in an assisted living community or an adult foster care home. This is a complicated and state-specific subject, so much so that a lengthy article has been dedicated to this subject here.

Other Ways to Pay for Assisted Living

For many Americans, assisted living fees are paid out-of-pocket using funds from a combination of resources.  Follows is an examination of each possible source with links to more detailed information.

Reverse Mortgages & HELOCs

Reverse mortgages and home equity lines of credit (HELOC) are two options homeowners have for using their homes to help pay for assisted living. However, these options are not available to all homeowners unilaterally, nor are they necessarily appropriate for every family or a sound economic decision. To use a reverse mortgage, for example, the individual must be married and their spouse must continue to live in the home as reverse mortgage rules state that a home must be owner-occupied. Home equity lines of credits do not have this limitation. They also have lower associated costs and can be a good option for couples of mixed ages who would not be eligible for a reverse mortgage. Eligibility requirements and a detailed discussion of the pros and cons of each option is available at the following links: Reverse Mortgages & Home Equity Lines of Credit.

Life Insurance Benefits and Conversions

There are five different ways life insurance policies can be used to pay for care while the policyholder is still alive. However, not all five options are available to all policyholders nor do they necessarily make economic sense for everyone. That said, life insurance is one of the most under-utilized of the self-payment options for assisted living.

1. Life settlements are an option in which a policyholder sells their right to collect the death benefit from their policy and they stop making monthly premium payments in exchange for an immediate lump sum of cash.
2. Viatical settlements are similar to life settlements but are designed for terminally ill individuals.  Typically, viatical settlements fetch a higher buyout for the policy than a life settlement.
3. Accelerated death benefits are an option that enables terminally ill individuals to receive a portion of their death benefits in advance of their death.
4. Death benefits loans are loans taken against the cash value of the policy, not the death benefit. These must be re-paid or the death benefit will be reduced.
5. Life insurance conversions directly convert the value of a policy in exchange for care. For example, an individual with a $100,000 policy may exchange that for several years in an assisted living or senior living community.  Of these five options, it is likely life insurance policyholders will receive the greatest value for their policy using this approach.

A detailed discussion of the pros, cons, costs and benefits of each of these options are available at the following links: Life Settlements, Viatical Settlements, Accelerated Death Benefits, Death Benefit Loans, Life Insurance Conversions.

Assisted Living Loans

Assisted living specific loans, when used appropriately, provide families with great flexibility.  Assisted living loans are designed for short term financial gaps typically for periods of less than 2 years. They are ideal when families have unexpected assisted living costs and are waiting for other resources to become available. For example, if an individual is moving into assisted living and is waiting for a home to sell and they are uncertain how long that process will take, a loan is a very good option.  Another example is when a veteran has applied for the Aid & Attendance benefit.  The approval process can be lengthy but once approved, the benefits are paid retroactively to their application date in a lump sum.  The lump sum is then used to pay off the assisted living loan.  Read a detailed analysis of the costs and benefits of assisted living loans here.

Long Term Care Insurance

A small number of families are fortunate enough to have long term care insurance, perhaps 5% of American seniors. However, for those who do not have long term care insurance and have a need for care, it is no longer possible to purchase these policies. A more detailed discussion of long term care insurance is available here.