Senior Citizen News Article
What to do when mom's money runs out
Nursing-home costs can vaporize an elderly parent's life savings and many boomers are being caught off guard. Here are some resources to help.
It’s a dilemma for the ages. As Depression-era elders reach their declining years, their baby-boomer children worry that their parents will run out of money before they run out of years.
Even supplemented by Social Security and pension payments, the nest egg that your parents took a lifetime to build isn’t likely to be enough to cover an extended stay in a nursing home or assisted-living facility. Few seniors carry long-term-care insurance to cover the bills. At nursing homes around the country, most people go through their assets within a year, warns Charles Johnson, director of the Illinois Department on Aging.
Your impulse to ride to the rescue is likely to be held in check by the need to pay the mortgage, save for your own retirement and maybe put your kids through college. So, what are your options when Mom or Dad runs out of money?
The safety net
Just a year after her husband died, in 1999, Mary Cruice suffered a cerebral hemorrhage that left her needing round-the-clock nursing-home care. Now 89, she’s in a chronic vegetative state. Her daughter, Maggie D’Alesio of Drexel Hill, Pa., drew down her mother’s $100,000 in savings (mostly from the sale of the family home) to pay the bills. It was gone in less than three years.
D’Alesio is an only child -- there are no siblings to share the burden. And she and her husband, Rudy, have five children of their own, with three still at home. She’s a nurse, Rudy is a police officer. There was little choice but to start filling out paperwork for Medicaid, the government program that provides health care for the poor. Now Cruice’s Social Security and her late husband’s pension pay about half of the $5,000-per-month cost; Medicaid covers the rest, with a tiny allowance ($10 per month) for personal expenses.
To get that help, D’Alesio spent three months navigating a bureaucratic maze to prove to the government that her mother was essentially impoverished. To qualify for Medicaid, nursing-home residents must usually show no more than $2,000 in assets. Aside from gathering checking- and savings-account statements and showing that investment accounts had been depleted, D’Alesio had to track down a 70-year-old life insurance policy to prove that it had been cashed in. "It was a nightmare of paperwork," she recalls. "Whatever my mother had in 2000, I had to show where it went in 2001 and where it was in 2003 when she went on to welfare."
Under the rules, a small slice of Cruice’s assets were protected: modest bank accounts for two grandchildren and one great-grandchild. Generally, the state can’t touch money you’ve given away more than three years before you enter a nursing home. But a misstep cost Cruice’s oldest granddaughter half of her $10,000 account. When the granddaughter turned 21, Cruice changed the account to joint ownership. That allowed the state to claim $5,000 of the money for nursing-home costs. "In hindsight, I should have gotten a lawyer who specializes in geriatrics," says D’Alesio.
If you do hire a lawyer to help with Medicaid eligibility, insist on an elder-care specialist. "Many times I have seen people who have not gone to an attorney experienced in elder care and Medicaid, and they have been given bad advice," says Renee Slifkin, a Medicaid-eligibility manager for Genesis HealthCare, which operates about 200 elder-care facilities in the eastern U.S.
What if Mom is in a nursing home and Dad still lives at home? In addition to the family home, he can keep up to about $93,000 in assets (rules and exact amounts vary by state). He’s also entitled to monthly income that ranges from about $1,500 to $2,300. Any income above that goes toward the cost of Mom’s care.
If Mom is the sole occupant of the house and moves to a nursing home, she might eventually be expected to sell and use the funds to foot nursing-home costs, if it’s clear she won’t be returning home. More often, the state will wait until she dies or the house is sold to exercise its right to tap proceeds of the sale for reimbursement of nursing-home costs.
In addition to one’s home, many states exclude IRA assets from the Medicaid-eligibility test if you are taking required minimum distributions each year. You will, however, be expected to use those withdrawals toward nursing-home expenses. In California, "it’s possible to have a million-dollar home and $800,000 in an IRA and still qualify for Medicaid," says Ruth Phelps, an elder-law attorney in Pasadena.
The good news is that Cruice’s care continued undisturbed after she switched from private pay to Medicaid. "Our county nursing home is wonderful," says D’Alesio. "My mother has never had a bed sore or a cold." And the nursing home is less than ten miles from D’Alesio’s house.
Federal law prohibits discrimination against Medicaid patients, so a nursing home can’t legally evict someone when his or her money runs out and Medicaid kicks in. But if you have a private room, you can expect to gain a roommate; the government program does not pay for a private room.
An elderly person who enters a nursing home as a private-pay patient will have more options than someone who enters as a Medicaid patient. Many facilities limit the number of Medicaid beds available, chiefly because Medicaid pays substantially less than what private-pay residents are charged. To step around any waiting list for Medicaid beds, some facilities will ask you to show that you can pay out of pocket for at least several months before they’ll give you a private-pay spot.
This show-me-the-money approach is more common at high-end facilities, says Bernard Krooks, an elder-law attorney in New York City. "Nursing homes ought not to be doing these things," says Krooks, "but they are."
For that reason, elder-care experts recommend that you avoid spending every last penny on assisted living or home-based care before seeking out a facility that will accept Medicaid. (The vast majority do.) If a facility requires that you have a certain level of resources to be admitted, Marilyn Vocker, director of social services at the North Shore Senior Center, near Chicago, suggests that you look for -- or ask for -- language in the contract specifying that once you’ve paid privately for the agreed-upon amount of time, you can apply for public aid and stay in the facility. Although the law promises such protection, getting it in writing from the nursing home is a good idea.
Additional advice from lawyers and social workers:
Back at home
- Apply for Medicaid before you run out of money. It can take a few months to be approved.
- Consider setting up an irrevocable burial fund>. You can do this through a bank or a funeral home. Money in the fund doesn’t count in the financial-eligibility test.
- Pay off outstanding bills and debts before applying for Medicaid. The government’s eligibility formulas do not subtract them from assets.
- Be sure that your parents’ bank statements and other financial papers are in order. The state has the right to delve into the flow of income and assets going back three years (or five years, if your parents have set up any trusts).
Ninety-six-year-old Helen Atkins doesn’t need round-the-clock nursing-home care. But her need for help with basic tasks -- bathing, dressing and getting around -- increased steadily in the 10 years she spent in an assisted-living facility in Washington, D.C., as did the cost of her care. At first, her $3,500-a-month teacher’s pension fully covered her expenses. But as prices rose and Atkins’ needs grew, her daughter Melanie Anderson had to chip in. "I could have bought a Rolls-Royce with what I have borrowed to keep my mother in the facility," Anderson says. She also sold "every piece of property" her mother owned to raise cash.
This spring, Anderson threw in the towel and brought her mom home to live with her even though she was newly married and it complicated her family life. "I could have put her in a nursing home and put her on Medicaid, but that didn’t seem to be an option to me," she says. "I wanted her to have more personal attention, and her own room and her own things."
Anderson uses her mom’s pension to pay for a personal assistant who comes in for 11 hours a day during the week and some Saturdays. The aide helps Atkins bathe and dress, and also serves her meals. They play cards, go to the park and treat themselves at Ben & Jerry’s. "My mom is glad to be at home," Anderson says, "but she misses her friends and the organized activities at the facility."
Many elderly Americans in Atkins’s shoes do wind up in a nursing home, even though they don’t need 24/7 care in an institutionalized setting. The reason: Medicaid is tailored to cover nursing-home care and rarely covers assisted living. "So even though they’re not truly eligible for a nursing-home bed, they will move into a nursing home, and their quality of life changes dramatically," says Karen Love, founder and chair of the Consumer Consortium on Assisted Living.
Although most assisted-living facilities do not accept Medicaid, some states are experimenting with using Medicaid money to pay for assisted-living care under an exception to the rules called a Medicaid waiver. For instance, a program called Coming Home, spearheaded by NCB Development Corp. currently helps nearly 800 seniors in nine states live semi-independently in assisted-living facilities. The rent on their studio and one-bedroom apartments is paid for by Medicaid. A handful of other experimental programs exist around the country. Your local agency on aging can tell you if anything similar exists in your community.
In a trend that’s grown dramatically in the past decade, Medicaid waivers are used more commonly to pay for in-home care and programs, such as adult day care, that allow seniors to continue living at home. Forty-nine states now have such waivers, and in 2001, 10% of Medicaid recipients received in-home or community-based care under a waiver.
Because Medicaid funds for home care are limited, however, there may be a waiting list for government-funded home-based services in your community. You also have fewer choices and less control than you would if you were paying out of pocket. You may be limited to choosing from an approved list of providers, and the amount of care may be less than you want. In Illinois, for instance, Medicaid-funded in-home services cover no more than six hours of care a day, Monday through Friday.
At home, on the house
Paul Haney of Xenia, Ohio, lived into his 90s at home with minimal help until four years ago, when he fell down a flight of stairs and broke his hip. Now, at 95, he is confined to a wheelchair and needs 24-hour care. "We would hate to see him go in to a nursing home," says his daughter Paula Zaino, who also lives in Xenia. "He would not get the care that he’s getting at home."
Haney’s savings, about $50,000, covered a live-in caregiver’s pay for about two years. His home, worth about $113,000, was his only remaining asset. With Zaino’s help, he took out a reverse mortgage that pays him $1,600 a month. That steady income and his $1,350 Social Security check cover his live-in caregiver’s $2,400-a-month salary, plus his outlays for food, medicine and home maintenance.
A reverse mortgage is a loan or line of credit against the equity in your house, but it differs from a home-equity loan in that there are no monthly payments. You can take out a lump sum, a regular monthly payout or a combination of the two. (Haney, for instance, took out an extra $1,000 at closing to pay real estate taxes.) The loan comes due after the house is sold, when the amount borrowed is repaid, with interest. If there’s money left over, it goes to the homeowner or his or her heirs. Although you can qualify at age 62, the loans are most practical for those in their 70s and older.
Payments on a reverse mortgage generally continue as long as the borrower (or borrowers, in the case of a married couple) lives in the home, even if the cumulative sum exceeds the equity in the house. To protect themselves, lenders are conservative in capping the monthly draw allowed. For example, an 80-year-old New Yorker with $200,000 in home equity could draw up to $980 a month.
The big drawback to a reverse mortgage is the high upfront fees that are rolled into the loan -- as much as 8% of the value of the house, including a set-aside for monthly service fees. So if your dad takes out a reverse mortgage and dies or moves to a nursing home within a couple of years, he will end up having taken out a very expensive loan.
Haney’s loan differs from most reverse mortgages in that it has a fixed life rather than promising payments for as long as the borrower is in the house. By limiting the payout period to about six years, Haney was able to boost the monthly payment from about $1,100 to $1,600. If he’s still in the house when the payout period ends, he can remain there without making payments until he dies or moves to a nursing home. The loan will come due when the house is sold. "Given his short life expectancy and given what the family needed, they felt this would be the best option," says Haney’s Wells Fargo loan officer, Dana Weese.
"At first my dad was upset about taking out the reverse mortgage because he wanted to leave his children the house," says Zaino. "All we want is for him to be well taken care of."
One of the biggest struggles some families face is whether to reach into their own pockets to cover the costs of a parent’s care in old age. Zaino says she and her four brothers will consider that option if the reverse mortgage runs out. "Some might be able to, and some won’t," she says. But a county social worker recommended that the family turn to Medicaid instead of bearing the costs themselves.
But Medicaid would probably not cover 24-hour in-home care. For Haney to qualify for that under the Medicaid waiver, his home-care expenses would have to be less than the cost of putting him in a nursing home.
In fact, relatively few families manage costs by having adult children contribute to their parents’ care, says Love: "The adult children are paying their own kids’ college tuition." More often, elderly parents go on Medicaid or move in with one of their children or another relative, she says.
But among the presumably more affluent families that hire geriatric-care managers to help navigate their elder-care options, the younger generation subsidizing the older is more common. Steve Barlam, co-founder of an elder-care management service called LivHome, in Los Angeles, says that about 25% of his clients are supported by family members, typically their children. Many of those family members benefit from a tax deduction for taking on a parent or elderly relative as a dependent, he points out.
The safety net sometimes reaches beyond sons and daughters, too. Linda Aufderhaar, a geriatric-care manager in Fairfax, Va., cites a client with no children but whose seven nieces and nephews chip in toward the cost of their uncle’s care in an assisted-living facility. "I credit them for being so loving and proactive in his care," Aufderhaar says.
Where to turn for help
Helping an elderly parent find appropriate care and figuring out how to pay for it can be an overwhelming job. Fortunately, help is available.
- Area agencies on aging can help you select an elder-care facility, refer you to home care and other community-based resources, or help you figure out if your parent is eligible for Medicaid. You can find the appropriate agency via the Eldercare Locator or by calling 800-677-1116.
- The National Association of Professional Geriatric Care Managers will refer you to a private care manager who can help with many of the same issues and who may be able to offer more personal attention than a public social worker could.
- The National Academy of Elder Law Attorneys can refer you to a lawyer in your area who specializes in elder-care issues.
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