Available Resources To Reduce Your Cost Of Living In A Retirement Or Assisted Living Community
There are ways you can reduce your cost of living in a retirement or assisted living community. Some of them depend on where you live, but others are generally available throughout the U.S., or in California where I am located. The following are a sampling of available programs, tax based aid, or long term planning tools that may help you or your loved ones.
VA Aid & Attendance Benefits:
Applying for VA Aid & Attendance is a time consuming process, and the program has a number of qualification issues that each veteran has to work through. I am not certified to provide application services to veterans for Aid & Attendance, nor any other VA benefits. The information I am providing here is readily available to the public through a variety of VA sources, and I am only restating it in outline form so that veterans and their families can have a thumbnail explanation before seeking benefits. If it is time for you to apply for VA Aid & Attendance, contact your local VA Office for more complete information and the forms required. If you live in California, you can get free help from your local County Veterans Service Office.
Aid & Attendance is for applicants who need financial help for in-home care, to pay for an assisted living facility, or to pay for a nursing home. It is a non-service connected disability benefit. The disability does not have to be a result of service, and you cannot receive non-service and service-connected compensation at the same time. This means that if you are receiving service-connected compensation, but can also demonstrate a need for Aid & Attendance, you will not be allowed to double dip the system. Because you cannot receive both types of compensation at the same time, you must seek the advice of an expert before applying for Aid & Attendance if you are currently receiving service connected compensation, to determine if you will receive more total compensation under one system than the other.
VA Aid & Attendance is only available to veterans or their surviving spouses who meet the following criteria:
1. An Honorable Discharge of the Veteran from a branch of the U.S.A. Armed Forces (including guard);
2. At least 90 days of active duty military service;
3. At least 1 day of the 90 days must be during one of the following periods:
World War I: 4/6/1917 through 11/11/1918
World War II: 12/7/1941 through 12/31/1946
Korea: 6/25/1950 through 1/31/1955
Vietnam: 8/5/1964 through 5/7/1975
Lebanon: 8/25/1982 through (Still Being Determined)
Grenada: 10/25/1983 through 12/15/1983
Panama: 12/20/1989 through 1/31/1990
Persian Gulf: 8/2/1990 through (Still Being Determined)
1. The Veteran must be 65 years old or older, or under 65 and permanently or completely disabled;
2. Service in the Merchant Marine during World War II counts the same as Naval service providing that there was service of 90 days at sea;
3. Women in the World War II military, including nurses, qualify as veterans;
4. Reserves and National Guard are not qualified unless they served 90 days active Federal duty service with 1 day during a period of conflict. (Training does not count as active duty.);
5. The 90 day rule is excepted for those who served less than 90 days but were awarded the Purple Heart, suffered a service connected disability, or were killed in the line of duty;
6. Aid & Attendance is a needs based system, so the veteran or surviving spouse has to satisfy both the physical needs based criteria, and the financial qualifications consisting of their level of countable family income, and their total asset level component;
VA Aid & Attendance Maximum Monthly Pension Rates are increased periodically, but the recent rates I have seen are:
A Veteran who is Single: $1,703.00
A Veteran With a Spouse: $2,019.00
Both Husband & Wife are Veterans: $2,631.00
Surviving Spouse of a Veteran: $1,094.00
Surviving Spouse with 1 Dependent: $1,306.00
VA Disability Benefits:
VA Disability Benefits are also available to veterans with service-connected disabilities and their surviving spouses. However, the application process and rating system are too complicated for me to provide a rational synopsis in this article. If you have a service-connected disability, or you are the surviving spouse of a veteran who was receiving service-connected disability compensation, contact the Veterans Service Office near you and start the application process through them. Depending on the disability rating and the number of dependents, the disability payments can range from a few hundred dollars to over $3,000 per month. In addition, veterans with a spouse, children, and dependent parents may also be able to obtain increases in their monthly benefits.
Tax Deductions For Care:
The following has been excerpted from IRS informational documentation, and is only a general description provided to allow you to understand the basic concepts of deductibility of medical expenses in the assisted living area. If you are a resident of an assisted living facility, or the child of such a resident, you should seek the advice of a qualified tax expert for detailed analysis of your particular tax circumstances.
In general, medical expenses, including some long term care expenses, are deductible if the expenses are greater than 7.5% of your adjusted gross income. To deduct assisted living expenses, you must be considered chronically ill. This means that a doctor or nurse must certify that you are either (1) unable to perform at least two activities of daily living (transferring, bathing, dressing, eating on your own, toileting, or you are incontinent), or (2) you require supervision because of cognitive impairment, such as Alzheimer’s desease or other form of dementia.
A further requirement, is that the personal care services are provided according to a plan of care prescribed by a licensed health care provider. (Doctor, nurse, or social worker.) Most assisted living facilities prepare care plans for their residents as part of their admission policy.
Normally, only the medical care component of assisted living is deductible. However, if the resident is chronically ill and in the facility primarily for medical care, and the care is being performed according to a certified care plan, the room and board may be considered part of the medical care and also be deductible. If, however, you are in the assisted living facility for custodial reasons, not primarily for administration of the medical care, the costs are only deductible to a limited level. None of these costs are deductible if they are reimbursed by insurance policies or other programs.
Even if you are not chronically ill, you may still deduct that portion of your expenses that are attributable to medical care. Adult children of the resident of an assisted living facility may also use the deduction if they can treat the senior as a dependent for tax purposes. The taxpayer must be a U.S. citizen, or a legal resident of the U.S. (or in some cases of Canada, or Mexico), and provide more than half of the senior’s total support for the year. There is also a formular for when multiple children supply support to their parent in an assisted living facility to take percentages of the deductions according to a written Multiple Support Declaration. Assisted living facilities are responsible for reporting what portion of the fees received are attributable to medical costs.
Long Term Care Insurance:
Unless you are a wealthy person or a very poor person, you will probably have to pay for your own long term care needs at some point in your later years. The wealthy have enough assets to provide for their assisted living expenses and still leave an estate behind for their family. The poor having nearly nothing saved for long term care and no substantial assets, and will likely qualify quickly for Medicaid/MediCal coverage of their nursing home costs. Those in the middle will not have enough saved to both pay for their long term care and leave something to their heirs.
Some experts say should do what attorneys call Medicaid/MediCal planning, which basically means you give away your assets to family members now, or irrevocably give up control of your assets now, and hope to wait out the 60 month look back period built into the Medicaid/MediCal programs before you require long term care. This is not always a good idea, as the facilities available to you as a Medicaid/MediCal qualified patient are often not nearly as nice as the private pay assisted living you could have afforded if you had long term care insurance as well as retained your assets to help pay for such care. Secondarily, many states are cutting back on the scope of their Medicaid packages, which may negatively impact the amount and type of care you will actually receive in the future.
One way to help pay for your long term care needs, is to purchase long term care insurance while you are still young enough to keep the premiums low over the life of the policy. There are pros and cons to doing so. On the plus side, you can provide for a set minimum number of years of payments at a set amount per day. You can even have an inflation factor included to make sure your daily payments rise with the costs of care. Since skilled nursing already costs over $235 or more per day in California, this may be a good way to protect against inflation and preserve your other assets for future needs or your heirs. On the negative side, long term care insurance is a bet between you and the insurance company that you will use up a high percentage of your coverage for your needs, versus the insurance company hope that you will either pass away without activating your policy, or only need care for a short period, leaving a large percentage of your payments with the company as profits. You can be assured, that the insurance companies have calculated their premium structure to benefit themselves in most situations.
Your personal decision on purchasing long term care insurance may boil down to the piece of mind provided by knowing you can go into private pay assisted living of your choice, versus a nursing home environment which may not be as pleasant an experience. In addition, if you do have to go into a nursing home, and you have long term care insurance, it will pay for a percentage of your care and you will preserve your other assets for your spouse’s needs and/or your heirs.
An additional point to remember, is that some life insurance policies include a conversion right to use the paid up value as a source for long term care. If you own such a life policy, you should check into converting it when you need care. It is also possible to sell your insurance policy value, and apply the proceeds to your care. Several states are actually considering legislation that will require you to utilize this option rather than let the policy lapse in order to qualify for medicaid.
Medi-Cal Assisted Living Waiver Program:
The Assisted Living Waiver Program in California, is designed to enable low-income Medi-Cal eligible seniors and persons with disabilities, who would otherwise require nursing facility services, to remain in or relocate to the community. The Assisted Living Waiver Program services Fresno, Los Angeles, Riverside, Sacramento, San Bernardino, San Joaquin and Sonoma counties. Residents of other counties can apply for the program if they are willing to move to a facility located in one of the participating counties.
Participants are allowed to select the facility of their choice. Care Coordination Agencies must inform participants of the available facilities and providers in the county. Residential Care Facilities for the Elderly are allowed to reject a participant at their discretion. However, once a facility admits someone, it must provide necessary services, and adapt services as the participant’s needs change. All providers are expected to deliver all four levels of care.
Assisted Living Waiver participants have access to four different waivers:
1. Assisted Living Services: Services are provided by a Residential Care Facility for the Elderly or Assisted Care, and are provided by a licensed home health agency to residents in public housing. The services that must be provided to Assisted Living Waiver participants include:
A care plan for each resident;
Personal care and assistance;
Maintenance of the facility;
Intermittent skilled nursing care;
Meals and snacks;
Assistance with self-administration of medications;
Providing or coordinating of transportation;
2. Care Coordination: Identifying, organizing, coordinating, and monitoring services needed by clients.
3. Nursing Facility Transition Care Coordination: Services to help transition participants from a nursing home to the community.
4. Consumer Education: Helping the client take control and responsibility for their care and services.
Eligibility: Participants must be 21 years old or older, eligible for full-scope or share of cost Medi-Cal benefits, and require a nursing facility level of care. The eligibility key is that the program is designed to serve people who would otherwise need nursing home care, and who can also benefit from placement into, or back into, the community. The client’s need for nursing home level of care is determined by contracted Care Coordination Agencies using a standardized assessment tool.
Care Planning: The Department of Health Care Services has established four levels of care, known as tiers, and a payment level for each tier. Care Coordination Agencies determine the level of care each participant needs using the standardized assessment tool, and establish individualized service plans for each participant. Services included are covered by Medi-Cal through the Assisted Living Waiver Program, and/or other services are funded by other sources.
Participating Residential Care Facilities for the Elderly must develop a care plan to implement the service plan for each participating resident. Participants living in public housing sites have their care plans implemented by licensed and Medi-Cal certified home health agencies. Services provided in public housing sites are called Assisted Care under the Assisted Living Waiver Program.
Provider Eligibility: Interested providers must enroll as a Medi-Cal assisted living waiver provider. The basic requirements for the three main care provider types are as follows:
Residential Care Facilities for the Elderly must be licensed, not on probation or having pending accusations against their license, and be in substantial compliance with licensing requirements. In addition, Residential Care Facilities for the Elderly must also:
1. Meet the care needs of all participants in accordance with their care plans at all four levels of care;
2. Have awake staff 24 hours a day (except in facilities of 6 or fewer residents);
3. Employ, or contract with a nurse or nursing agency, to provide any required nursing services as often as necessary;
4. Have a hospice waiver and be able to care for cognitively impaired residents;
5. Have single occupancy rooms for participants, unless the participant chooses to have a roommate;
6. Have private bathrooms, or bathrooms shared by no more than two participants;
7. Have a Kitchenette in each participant’s room (except in facilities with six or fewer residents, where the requirement is waived if the resident has continuous access to the facility kitchen.
Care Coordination Agencies must have five years of experience in this field, have R.N. and social services care coordinators on staff, and meet other requirements.
Home Health Agencies must be licensed, enter into an operating agreement with the publicly funded housing site where they deliver services, open a branch office at that site, and meet other requirements.
Payment Rates: Participants pay for their own room and board at rates set by the facility. Medi-Cal payments only cover costs of specified care and services. Medi-Cal sets the reimbursement rates for each level of care, they are not negotiable by Residential Care Facilities for the Elderly or Home Health Agencies. The daily rates range from $52 for tier one, to $82 per day for tier four.
Care Coordination Agencies are paid $200 per participant per month, for care coordination services and for the coordination of other waiver benefits and services. In addition to care coordination, up to $2,500 is available to help a nursing home resident move back into a community setting, plus $1,000 may be available for care coordination services for that participant. For participants living in public housing, up to $1,500 per participant is available for environmental accessibility adaptations. Participants can also receive consumer education, interpretation and translation services.
Below Market Rate Assisted Living Packages:
Some assisted living facilities have programs, required by local municipalities at the time of approval of the project, which provide for lower income individuals to qualify for full service assisted living they would otherwise not be able to afford. The common thread for these programs is that they are for individuals that have too much income and/or too many assets to qualify for Medi-Cal or other government program, but not enough income, savings or assets to afford full private pay rates. The criteria for qualification for these programs vary, but it is important to inquire about their availability when contacting any upscale assisted living facility.
Bridge Loans To Help Pay The Initial Costs of Long Term Care:
If your senior loved one has non-liquid assets that are not immediately available to pay for assisted living costs, there are some lenders that specialize in loans to cash strapped families that cannot afford the move into assisted living until those assets are converted to cash. The loans are secured by the assets that are going to be sold in the future, and the funds are transferred directly to the assisted living facility to pay for rent and services. Unsecured loans can also be structured, allowing up to six family members to co-sign on the loan, and have the proceeds wired directly to the assisted living facility for payment.
Companies providing these loans are most often not traditional banks, with loan application and approval processes that are not as complicated or stringent as traditional banks. They also often lend at rates lower than traditional banks. Some of these lenders are also starting to structure home equity loans designed to provide a stream of payments for assisted living costs until the property is sold, and the equity loan paid off from the sale proceeds.
Balances for loans secured to property can reach over $1 million, and unsecured loan balances of up to $50,000 are available. Interest on unsecured loans vary between 8% and 12%. Interest on secured loans currently vary between 3.5% and 6.5%.