Paying for Assisted 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. Assisted living residences primarily provide non-medical, personal care and in support offer housekeeping, laundry, transportation, medication supervision, exercise and social programs. 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 2016, the average monthly cost of assisted living nationwide is $3,628. Alzheimer's and dementia care in assisted living costs, on average, an additional $1,150 per month, or $5,100 per month. Costs vary dramatically from state to state. In the South and Mid-West, the average monthly costs are from $3,000 - $3,600. In the Northeast and on the West Coast, $4,200 - $5,000 per month is the norm.
Medicaid and Assisted Living
As of 2016, Medicaid pays for some of the cost of assisted living in forty-six states.
Financial assistance from Medicaid for assisted living comes through several different types of Medicaid programs. The most common of which are Home and Community Based Services (HCBS Medicaid Waivers). The number of states offering these waivers has increased rapidly in recent years and assistance will likely 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) that pays for personal care and does not limit the location in which the personal care can be provided. Therefore, persons residing in assisted living or independent living residences can have outside assistance come in and provide personal care such as assistance bathing, grooming or transportation for medical appointments.
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 inconsistent, to say the least, across the forty-six states in which assistance is provided. 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 and other states limit assisted living to larger residences serving twelve or more persons, still other states have no regulation 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, by limiting the maximum amount that can be charged or by providing non-Medicaid assistance to Medicaid eligible persons.
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. This program can provide up to approximately $2,000 per month in assistance. 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. Veterans’ Directed Care, also called VD-HCBS, give the participating veteran 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.
**Medicare does not pay for assisted living, room and board, or personal care.
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. Prior to this discussion, it is important to clear up a common misperception regarding Medicare's coverage of assisted living costs. Medicare does not pay for assisted living, room and board, or 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.
Reverse Mortgages / HELOCs / EquityKey
Reverse mortgages, Home Equity Lines of Credit and Equity Key Agreements are three 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. The same applies with EquityKey Agreements and EquityKey is also limited to certain geographic areas. Home equity lines of credits do not have this limitation. They also have lower associated costs and can be good options for couples of mixed ages who would not be eligible for a reverse mortgage.
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 probably the most under-utilized of the self-payment options for assisted living.
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.
Viatical settlements are similar to life settlements but are designed for terminally ill individuals. Typically, viatical settlements fetch a higher buyout for the policy.
Accelerated death benefits are an option that enables terminally ill individuals to receive a portion of their death benefits in advance of their death.
Death benefits loans are loans taken against cash value of policy not the death benefit. These must be re-paid or the death benefit will be reduced.
Life insurance conversions directly convert the value of a policy in exchange for care. For example, an individual with $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.
Assisted Living Loans
Assisted living specific loans are a relatively new option which, when used appropriately, provide families with great flexibility. These 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. For example, if they are waiting for a home to sell or to be approved for a veteran's pension.
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.
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