How to Pay for Residential Care

Paying For Residential Care

Residential-care homes provide a smaller, more intimate and personalized atmosphere than what larger residential care facilities can typically offer. These homes serve small groups of seniors, with normally less than 12 residents to a facility. While these smaller group homes are usually 30 to 50 percent less expensive than larger facilities, residential-care homes are still costly.

Paying for Residential Care

Depending on the state where the home is located and the level of needed care, the cost of care can be as much as $7,000 per month. Understandably, finding a way to finance residential care can be a major cause of concern for your family. However, there are a few ways to defray at least part of the cost.

Here are the most common ways to pay for a residential-care home:

Paying out of Pocket: Approximately half of the people paying for residential care do so with personal funds. These methods include using savings and retirement accounts, pensions and other personal resources. Of course, the high cost of care can quickly deplete these resources.

Private Insurance: There are a few options for paying for a residential-care home with private insurance.

  1. Long-term care insurance is a type of health insurance designed to specifically cover ongoing care needs. Depending on the specific policy, this insurance will pay at least some of the cost of a residential-care home. However, according to statistics, less than three percent of seniors carry this type of insurance.
  2. Standard health insurance: Some health insurance policies may cover the cost of residential care. However, these policies will only pay the cost for a set period of time as spelled out in the policy.
  3. Life Insurance: Many types of life insurance will accrue a “cash value” where you can cash in the policy for a lump-sum cash payment.

Medicare: Under some very limited circumstances, Medicare Part A may cover the costs of care for a limited time, provided the home is Medicare-certified. Typically, there is a limit of up to 100 days per benefit period for seniors who meet coverage requirements. However, this typically applies only to licensed nursing homes and most residential-care homes will not meet this standard.

There are some supplementary Medicare insurance policies, such as Medigap, that may help cover some of the cost of residential care. However, Medicare supplemental insurance will typically only cover long-term care, outside of a hospital, for a short period and will usually only pay for deductibles and coinsurance.

Medicaid: For those with no financial resources, Medicaid will pay for any costs above room and board up to and including skilled-nursing care. Medicaid financial guidelines can vary quite a bit from one state to another, with some states being quite restrictive. You should contact your state Medicaid agency for program information and Medicaid eligibility requirements.

Some HMOs and other types of coordinated-care plans participate in Medicaid and Medicare programs. These healthcare plans will often offer some benefits above what is supplied by Medicare and Medicaid. If your senior is enrolled in a HMO or a competitive medical plan, consult the insurance agent.

Be aware, it may affect the amount Medicaid will pay for the cost of care if one spouse transfers financial resources, such as real estate holdings, for less than current market value less than 30 months prior to the date long-term care begins.

Planning Ahead

As people are living longer, the likelihood of your family someday paying for residential care is fairly high. Preparing for this possibility will insure that your loved one will be taken care of and that their care will not be a drain on your family’s financial resources. As roughly half the cost of residential care nationwide is paid directly with personal funds by seniors and their families, buying a comprehensive long-term care insurance policy is a smart decision. Because the price of long-term care insurance policies can vary widely, it is important to shop around and compare both the premium prices and coverage.

Consider these factors when shopping for long-term care insurance:

  • Make sure your family will be able to cover the ongoing premium costs.
  • Before buying long-term care insurance, find out if there is a cancellation period where you can receive a refund for the initial premium payment.
  • Make certain the policy does not base coverage on medical necessity or require a certain period of hospitalization before coverage will take effect.
  • Verify the insurer can’t cancel the policy for any reason other than nonpayment of premiums.
  • Be sure the policy has inflation protection that is realistic.
  • Find out if, and for how long, pre-existing conditions are excluded from coverage.
  • Determine if permanent exclusions for some conditions, like Alzheimer’s Disease, exists.
  • Investigate the long-term viability of the insurance company and especially the company’s underwriters. Call your state’s health insurance commission for help in identifying reputable and viable insurance companies.

By Care Homes Direct Editorial Team

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