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How to Pay for Long-term Care on a Fixed Budget

Long-term care costs are rising yearly, and with more people approaching age 65+ than ever before, the rates are not expected to fall. Not everyone plans ahead and unfortunately, we cannot know for certain when someone will begin to need long-term care, as it varies case by case. For the elderly population specifically, many individuals begin long-term care after a sudden life change that renders them incapable of caring for themselves, like a stroke or a fall. In the best-case scenario for a stroke or a fall, patients return home after successful rehabilitation. However, as unfortunate as it may be, many individuals are unable to return to their former health.

Sometimes, there is no sudden change and it is simply advanced age that is the main factor determining whether or not a person can safely remain independent. When someone does begin to need long-term care, depending upon the severity of the person’s situation, they are either taken care of by professional caregivers, family members, or moved into an institutional setting. Statistically speaking, about 80% of elderly people who need long-term care receive services within their own home or the home of a family member. The remaining 20% move into facilities, specially designed to accommodate a wide range of needs. Regardless of where we choose to spend our twilight years, there are costs involved. Below, I’ll outline some common ways people are able to fund their long-term care.

What Exactly is Long-term Care?

Long-term care simply refers to the type of assistance provided to people with cognitive or functional limitations to help them perform daily activities. If patients are unable to return safely home after a hospital stay, facilities continue rehabilitation to try and strengthen patients and improve their quality of life. The more a resident can do by himself or herself (eating, using the bathroom, bathing, and changing), the happier they generally are.

According to the Medicare Current Beneficiary Survey, the elderly population in nursing homes has declined over the past ten years. Through more advanced rehabilitation practices and increased availability to services, the majority of long-term care recipients are able to live with loved ones, in assisted living, or group homes if they do not need the intensive 24hour supervision that comes along with nursing home residence. Nevertheless, the question still remains: how to pay for the care you need.

Medicaid Long-term Care:

For many people, Medicaid is the best option when it comes time to pay for long-term care. If your loved one meets certain medical and financial requirements, or they are already receiving SSI benefits, they may be eligible. For most states, the monthly income limit is around $2,200 and the asset limit is $2,000. For Arizona specifically, the monthly income limit is $2,205. Anything beyond these values needs to be spent towards care or the applicant may be ineligible. The medical eligibility is stringent and the recipient can only live in Medicaid-approved homes or receive Medicaid-approved services in the community. Even with all of the requirements, this is still the best option for many families. For up-to-date Medicaid information, follow this link.

Long-term Care Insurance:

Although a person may have paid for medical insurance their whole life, medical insurance companies do not cover long-term care. There is, however, such a thing as long-term care insurance. There are different policies with different features, but generally, a person pays a monthly premium and when long-term care services are needed, the policy will pay out a certain amount, usually in the hundreds of thousands. Similar to life insurance, premiums are cheaper if the person buying insurance is young and healthy. Those already in need of long-term care services are not able to get coverage. Although these policies do not last forever, the payout is usually sufficient for the entire cost of care.

Sometimes, however, the care outlasts the insurance coverage. Don’t worry because many states have what is called a long-term care insurance partnership, useful when people spend through their policy and need to apply for Medicaid coverage. The partnership is a program between the state and private insurance companies. Partnership policies protect assets by reciprocating dollar for dollar what policyholders pay into their policies. For example, if you bought a Partnership Policy with a maximum benefit payout of $200,000, you are able to protect $200,000 of your assets. For married couples each spouse needs to purchase their own policy.

Once the original long-term care insurance coverage is exhausted, you may apply for Medicaid with the benefit pay out’s worth of assets exempted. This is extremely beneficial because again, most states have an asset limit of $2,000. In addition to the asset limit, Medicaid penalizes people who have given away or sold property below fair market value within the five years preceding the need for long-term care assistance.

Qualified Income Trust:

If an individual is over the financial limit for Medicaid long-term care coverage, some states allow applicants to spend down income towards medical care while others allow the creation of Qualified Income Trusts, also known as Miller Trusts. Miller Trusts place any income beyond the state’s limit into a trust, designating the state Medicaid program as the beneficiary once the long-term care recipient dies. The problem many people have with spend-down and Qualified Income Trusts is that for the most part, all assets and income eventually go towards care. Long-term care insurance, as described above, helps prevent the complete drain of assets for people who are hoping to leave behind a legacy.

Reverse Mortgage:

Another option that has gained popularity in recent years is the reverse mortgage. A reverse mortgage is not complicated, but may not be the best option for every situation. Essentially, a reverse mortgage is a loan borrowed against the equity of a home, but rather than making monthly payments, the bank reversely pays the borrower. As long as the borrower remains in the home they do not have to pay the bank.

If the borrower moves to a care facility or passes away, then the bank claims the property to pay off the amount given in the loan. This is a good option if the homeowner is healthy enough to remain at home, but requires some caregiving services. Also, this is for people who are not interested in leaving their home behind to loved ones. See here for a more detailed explanation of pros and cons.

Even with 80% of elders receiving “free” care through informal caretakers such as family members, the Congressional Budget Office estimates the value of this donated care at approximately $234 billion for 2011, the last year calculated.[1] This number is determined based on calculating forgone wages, time that could be spent employed elsewhere, transportation costs, and performing duties otherwise performed by paid healthcare aids.

For family caregivers it is especially important to reach out to a social worker for benefits you may not be aware of in your home state. If you are a family caretaker, your loved one may be eligible for respite care, a paid-for medical alert, home health services, or community based waivers paid for by Medicaid depending on financial and medical eligibility. Don’t wait until it is too late and start planning today.


[1] See page 2. http://www.cbo.gov/sites/default/files/44363-LTC.pdf

 

Medical Bills, EOBs, and You

Medical bills are confusing, and often frightening. Even if it’s for something simple, the numbers add up fast, and to sometimes alarming levels. Add the Explanation of Benefits (EOB) documents you get from your insurer for the same clinical visit or hospital stay, and you can find yourself wondering how much you owe whom, and for what, exactly?

“Not A Bill”

This will be printed on all EOBs, and is the only sure way to tell which is an actual medical bill, and which is an EOB. However, an EOB can be confusing – other than that clear “Not A Bill” printed somewhere on the form.

This is one of the EOBs I got during my own cancer treatment. It’s for my lumpectomy, but the only way I’d know that is the dates on the form. The singular lack of information on what the EOB is for is one of the distinguishing characteristics of these forms, so knowing what the services were, and what your plan’s coverage is for those services, are important details. The numbers are indeed scary, given the Provider Charges of $50,231.25, and the Amount Paid of $0.00. Someone unfamiliar with EOB-ese might have a panic attack before getting to the important phrase “there is no liability on your part for these services” in Remark(s) Explanation 3.

“Statement of Account”

Here’s the summary bill from the hospital that covers the same services (my surgery), but this might only add to the potential for confusion.

The bill has slightly more detail than the insurer’s EOB, but not that much. It mostly seems to be to a series of magic incantations that take the starting amount – New Charges or Adjustments, $53,911.00 – and bring that down to an Amount Due of $50.00. My insurer paid $5,430.02, and there were Adjustments of $48,430.98, which leaves $50.00. On the one hand, hallelujah; on the other hand, what’s the story with that $48,430.98 “adjustment”?

If I didn’t have insurance, would I be on the hook for that whole $53,911.00? Probably, but it’s hard to know exactly. This is where the “chaos behind a veil of secrecy” that is healthcare pricing is most visible: hospital charges.

I learned a lesson from this bill, by the way: always ask for an itemized bill, not a summary bill. Ask for that during the admission process (if it’s a hospital), or at the medical office or testing facility during check-in.

Staying ahead of the healthcare cost curve

Here are my tips for figuring out your medical bills, and your EOBs, to ensure you get what you pay for, and only pay for what you get:

  • ALWAYS ask for an itemized bill, don’t just take a summary bill (the mistake I made with the billing for my own cancer surgery).

  • Review that bill, line by line. Make sure that it doesn’t have anything on it that you did NOT receive. Use CMS’s CPT code look-up tool to help you break down the blizzard of numbers. [CPT codes are the five digit service codes used by all medical providers; they’re in the column labeled Svc Code in the bill example above.]
  • Have your insurer’s Summary of Benefits documentation handy while you review the bill(s). That will be available on your insurer’s website.
  • Do not pay a bill until you get the EOB associated with those billed services.
  • Line up the EOB, and the bill, to make sure the dollars and the codes are correct.
  • Challenge any billed items that are for services you didn’t receive.
  • If services you received are listed as not covered by your insurer on your EOB, challenge that with your insurer’s customer service crew.

Yes, it takes work. And it’s a little crazy that the American healthcare system expects people, particularly sick people, to manage this blizzard of paper with scary dollar figures on it. But the only way to make sure you don’t pay more for your medical care than you should is to be proactive. It’s what empowered patients do.