What happens if I run out of money in a care home?

According to the National Council on Aging, over 90% of seniors have at least one chronic condition that may eventually require long-term care. Given these high costs, the possibility of running out of funds is a major concern for many families. This guide explains what happens if I run out of money in a care home and outlines the steps to take to secure continued care.

Quick Summary

When care home funds are depleted, residents typically transition to government assistance programs like Medicaid, but this process requires careful planning to avoid service gaps. Facilities may initiate a discharge for non-payment, making proactive financial strategizing essential for securing continued residency and care through public benefits.

Key Points

• Medicaid is a safety net: When private funds are exhausted, Medicaid becomes the primary payer for long-term nursing home care, provided eligibility requirements are met.

• Start the application early: The Medicaid application process is lengthy. Begin planning and applying well before funds run out to avoid a gap in coverage and potential penalties.

• Understand the spend down process: You may be required to spend down your assets to a specific level to qualify for Medicaid. This process should be navigated with legal counsel to avoid mistakes.

• Prepare for facility discharge: Care homes can initiate a discharge for non-payment but must follow strict legal procedures, including a 30-day notice. Do not ignore these notices; use this time to finalize your Medicaid application.

• Consult experts for guidance: Seek assistance from an elder law attorney or a financial planner specializing in senior care. Their expertise is invaluable for navigating the complex rules and ensuring asset protection.

• Explore veterans' benefits: For qualifying veterans or their surviving spouses, benefits like Aid and Attendance can provide financial support for long-term care.

• Look into long-term care insurance: If a policy was purchased, review its benefits. It can help cover costs for a specified period and protect other assets.

• Your primary residence may be protected: In many states, your home is considered a non-countable asset for Medicaid eligibility, but it may be subject to recovery efforts after your death.

Proactive Planning: A Crucial First Step

Navigating the financial realities of long-term care is one of the most critical aspects of senior planning. A proactive approach can prevent the crisis of running out of money, ensuring a smooth transition to other forms of payment. Long-term care insurance is one option, designed specifically to cover the high costs of extended care services. For those with fewer financial resources, Medicaid is a primary solution, but eligibility and application are complex and must be handled well before funds are exhausted.

The Role of Medicaid in Long-Term Care

Medicaid is a joint federal and state program that provides health coverage to low-income individuals, including seniors. It is often the primary payment source for long-term nursing home care. Eligibility is based on strict income and asset limits, which vary by state. The process of transitioning from private pay to Medicaid is known as a "Medicaid spend down," where an individual uses their existing assets to pay for care until they reach the eligibility limits.

• Income limits: In most states, your income must be below a certain threshold. Income generally includes Social Security benefits, pensions, and other retirement income.
• Asset limits: An individual's "countable assets" must be below a specified amount. Non-countable assets typically include a primary residence (with certain equity limits), one vehicle, and personal belongings.
• Look-back period: Medicaid employs a look-back period, usually 60 months, to review all financial transactions. Any gifts or transfers of assets for less than market value during this time can result in a penalty period, delaying Medicaid eligibility.

What to Do When Funds are Dwindling

If you or a loved one is nearing the point of running out of money, it is vital to take immediate action. The first step is to consult with a financial advisor or elder law attorney who specializes in senior care. They can provide guidance on the Medicaid spend down process and help with complex financial arrangements.

• Consult an elder law attorney: These legal experts specialize in the rules and regulations surrounding Medicaid and can help structure finances to comply with eligibility requirements.
• Review all assets: Create a comprehensive list of all income sources and assets. Understanding what is countable versus non-countable is the first step in creating a spend down strategy.
• Explore other resources: Investigate potential veterans' benefits, long-term care insurance policies (if one was purchased), or state-specific programs that may offer assistance.

Understanding the Care Home's Process

When private funds run out, the care home must be informed immediately. The facility can provide a representative to guide you through the process, but they cannot legally force a resident to leave without following specific procedures. Facilities are required to provide 30 days' notice before discharging a resident for non-payment, during which time a resident can pursue Medicaid or other options.

The Potential for Discharge and Appeal

If a resident does not qualify for an alternative payment method, the care home can begin the process of involuntary discharge. This is a regulated process that requires the facility to provide a detailed discharge plan and allow time for the resident to find a new placement. If the resident has nowhere to go or can demonstrate that the discharge is unsafe, they may be able to appeal the decision. The key is to engage with the process and not ignore the care home's notices.

Comparison of Paying for Care Home Costs

Feature	Private Pay (Out-of-Pocket)	Long-Term Care Insurance	Medicaid
Funding Source	Personal income, savings, investments, home equity	Private insurance premiums	Federal and state funding
Eligibility	No restrictions, depends on personal wealth	Medically underwritten, requires health criteria	Strict income and asset limits
Coverage	Full cost of care, varies by facility	Covers specific daily amount for set period	Covers essential long-term care services
Flexibility	High, choice of any facility	Depends on policy terms and network	Limited, only facilities accepting Medicaid
Asset Protection	No, assets are spent down	Excellent, protects assets from depletion	Requires spending down to poverty limits, some asset protection with irrevocable trusts
Application	None	Medical underwriting	Extensive application, look-back period
Cost	Potentially very high; median nursing home private room cost over $127,000 annually	Varies by age, health, and coverage. Premiums can be expensive	Often requires spend down of personal assets

Conclusion: The Importance of Early Planning

Running out of money in a care home can be a stressful and frightening experience, but it does not have to mean an immediate loss of care. Programs like Medicaid exist to provide a safety net for those with depleted financial resources. The critical takeaway is the need for early and proactive planning. By understanding the financial landscape, exploring all available resources, and working with legal and financial professionals, seniors and their families can navigate this challenge with confidence and secure the continued care and stability they deserve. For more information, consult trusted organizations like the National Council on Aging to access valuable resources and counseling.

For more in-depth information and resources on financial planning for seniors and caregiving, consider visiting the National Council on Aging's website. https://www.ncoa.org/

Frequently Asked Questions

Does Medicare cover long-term nursing home care?

No, Medicare does not cover long-term custodial care in a nursing home. It may cover short-term stays (up to 100 days) for skilled nursing or rehabilitative care following a qualifying hospital stay, but is not intended for long-term residency.

What is a Medicaid 'spend down'?

A Medicaid 'spend down' is the process of using your financial assets to pay for care until your remaining assets meet the state's eligibility limit for Medicaid. This can involve paying for medical bills or care home costs until you qualify for assistance.

Can a care home legally evict a resident who runs out of money?

Yes, a care home can evict a resident for non-payment, but they must follow strict regulations. The facility must provide adequate notice, typically 30 days, and work with the resident to find alternative payment sources like Medicaid.

What is the 'look-back period' for Medicaid?

The look-back period is the 60-month period prior to your Medicaid application. During this time, the state reviews all financial transfers to ensure no assets were given away or sold for less than market value to qualify for Medicaid. Doing so can result in a penalty.

Are my assets, like my home, protected from being used for care home costs?

A primary residence is often considered a non-countable asset for Medicaid eligibility, but there are important exceptions and limits. After your death, the state may seek to recover care costs from your estate, including your home. Irrevocable trusts can offer some protection, but require early planning.

Where can I find help with the Medicaid application process?

For assistance, you can contact your local Area Agency on Aging (AAA), an elder law attorney, or your state's Department of Social Services. These organizations can provide guidance on eligibility and the application process.

What if my care home does not accept Medicaid?

Not all care facilities are required to accept Medicaid. If your facility does not, you will need to find one that does. It is important to confirm this with the facility early in the process to avoid potential displacement.