Federal Protections: The Nursing Home Reform Act
The federal Nursing Home Reform Act (NHRA) of 1987 offers significant protection for family members of nursing home residents. The NHRA strictly prohibits nursing homes that accept Medicare or Medicaid from requiring a third party, such as a family member or friend, to personally guarantee payment for a resident's care. This means that as a condition for admission or continued stay, a facility cannot demand that a family member sign a contract agreeing to pay the bill with their own personal funds. This is a crucial defense against predatory billing practices.
However, these protections are not absolute. They do not prevent a family member who has access to the resident's funds (e.g., through a Power of Attorney) from agreeing to use the resident’s money to pay the bill. The key distinction is that the family member is not liable for payment with their own money, but rather has a fiduciary duty to manage and use the resident's funds properly for their care. Misuse of these funds, such as spending them on personal expenses, can still lead to legal action by the nursing home to recover costs.
The Resurgence of Filial Responsibility Laws
While largely unenforced for many decades, old filial responsibility laws still exist in more than half of U.S. states. These statutes can, in theory, obligate adult children to financially support their indigent parents, covering necessities like housing, medical care, and clothing. A nursing home could potentially sue an adult child under one of these laws if the parent is unable to pay their bills. Enforcement is rare, primarily because most indigent seniors qualify for Medicaid, which then becomes the payer.
Notable Filial Responsibility Case
The most famous modern case occurred in Pennsylvania, a state with an active filial law. In Health Care & Retirement Corporation of America v. Pittas (2012), a son was ordered to pay his mother’s $93,000 nursing home bill after she left the country without paying. This case illustrates that while the threat is small, it is not zero, particularly in states with these laws on the books. It is vital to understand your state's laws and consult an elder law attorney if a filial responsibility claim is made against you.
The Medicaid Look-Back Period and Asset Transfers
Medicaid is the primary payer for long-term nursing home care for those with limited income and assets. To prevent applicants from simply giving away assets to qualify, Medicaid has a 60-month (5-year) look-back period in most states. During this period, state Medicaid agencies review all financial transactions. If an applicant transferred assets for less than fair market value—such as gifting money or property to family members—a penalty period of ineligibility for Medicaid coverage may be imposed.
For example, if an applicant gifts a home to a child during the look-back period and is later penalized, the family might be responsible for covering the nursing home costs out-of-pocket for the duration of that penalty period. The penalty is calculated by dividing the value of the transferred asset by the average monthly cost of nursing home care in that state. This means a simple gift could result in a family member unknowingly taking on a significant financial burden.
Navigating the Admissions Agreement
Signing a nursing home admissions contract requires extreme caution. While federal law prohibits requiring a personal guarantee, some facilities use complex and confusing language to intimidate family members into accepting liability. Common problematic terms include:
- "Responsible Party": This term can be used ambiguously. While intended to signify someone responsible for managing the resident's affairs, a poorly worded contract could imply personal financial liability.
- "Joint and Several Liability": This clause attempts to make the resident and the family member who signed equally responsible for the bill. It is often illegal under federal law when applied to a third-party guarantor.
If you are acting as a Power of Attorney, you should sign documents clearly indicating you are doing so on behalf of the resident, not in your personal capacity. If the facility demands you sign as a personal guarantor, you have the right to refuse.
Comparison of Paying for Long-Term Care
| Payment Method | Key Characteristics | Advantages | Disadvantages |
|---|---|---|---|
| Private Pay | Uses personal income, savings, and investments. | Offers the most flexibility and choice of facilities. | Can quickly deplete savings and assets. |
| Medicare | Covers short-term, skilled nursing facility stays after a qualifying hospital stay (up to 100 days). | Can cover initial costs, especially post-hospitalization rehab. | Very limited coverage; does not cover long-term custodial care. |
| Medicaid | State and federal program for low-income individuals. | Pays for long-term care indefinitely for eligible individuals. | Strict income and asset limits, includes a 5-year look-back period, and may offer fewer facility options. |
| Long-Term Care Insurance | Private insurance policies that cover services like nursing home care. | Helps protect personal assets and offers more choice. | Expensive, especially if purchased later in life; premiums can rise. |
How to Protect Your Family from Liability
- Seek Professional Counsel: Consult with an elder law attorney before a loved one enters a nursing home. They can review admissions agreements and help with Medicaid planning to protect assets properly.
- Understand Your State's Laws: Research your state’s specific filial responsibility laws and Medicaid rules. Some states, like Florida, have no filial laws, while others, like Pennsylvania, have enforced them.
- Use Power of Attorney Carefully: If you have Power of Attorney, be scrupulous in your record-keeping and use your loved one's funds only for their benefit. Never commingle their money with your own.
- Plan Ahead: Engage in proactive estate planning and Medicaid planning well before nursing home care is needed. This includes considering trusts, annuities, and strategic asset spending to avoid look-back period penalties.
Conclusion
For families concerned about financial responsibility for nursing home costs, the situation is complex but manageable with the right information and planning. While federal law protects you from being forced into a personal guarantee, state filial laws, improper handling of assets, and ambiguous admissions contracts can create liability. Understanding these risks and proactively seeking expert legal advice are the most important steps families can take to protect their financial well-being. By planning ahead, you can secure your loved one's care without placing your own savings in jeopardy. Learn more about your rights as a caregiver and nursing home debt from the Consumer Financial Protection Bureau.
