The high cost of long-term care means that even families with significant savings can face financial challenges. If a resident's private funds run out, several things can happen, and understanding your rights is crucial. The most important first step is not to panic, as there are established legal paths to navigate this situation, primarily involving Medicaid and leveraging legal protections for both residents and their families.
The Immediate Consequences of Non-Payment
When a nursing home bill goes unpaid, the facility will typically begin a formal process to collect the debt. This does not mean a resident will be immediately removed. Federal and state laws provide residents with protections to ensure a safe transition.
- Written Notice: Except in emergencies, a nursing home must provide a resident with a written notice at least 30 days before initiating a transfer or discharge for non-payment. The notice must include the reason for the move, the effective date, and details on how to appeal the decision.
- Appealing Discharge: A resident has the right to appeal a discharge or transfer decision to the state. This process can extend the time a resident can remain in the facility while a solution is sought.
- Safe Discharge: The facility is legally obligated to ensure the resident has a safe and orderly transfer. They cannot simply leave a resident without a place to go, which is especially important for individuals with significant care needs.
The Critical Role of Medicaid
For most people who run out of private funds for long-term care, Medicaid becomes the primary payer. Unlike Medicare, which only covers a short-term skilled nursing stay, Medicaid is the largest source of funding for long-term nursing home care.
To become eligible for Medicaid, an individual must meet state-specific financial and medical criteria. This process can be lengthy and requires careful documentation. An individual must demonstrate that their income and assets fall below certain limits. If an individual has too many assets, they can engage in a "spend-down" process, using those assets to pay for care or other qualified expenses until they meet eligibility requirements.
Protecting Family from Liability
A major fear for many families is that a nursing home will hold them financially responsible for a loved one's debt. However, federal law provides strong protections against this, a fact solidified by guidance from the Consumer Financial Protection Bureau.
Understanding Contract Language
When a resident is admitted, a family member or caregiver may be asked to sign the admissions contract. It is critical to scrutinize this document for language that attempts to assign personal financial responsibility to a third party. Terms like "responsible party" or "joint and several liability" should be carefully reviewed. Under the federal Nursing Home Reform Act, facilities cannot require a third party to use their own money to pay for a resident's bill as a condition of admission or continued stay.
Misuse of Funds Clause
While a third party cannot be forced to pay with their own funds, a nursing home can pursue legal action if a person with access to the resident's funds (e.g., a Power of Attorney) misuses those funds instead of paying the facility. This is why meticulous record-keeping of a resident's finances is essential for anyone managing their affairs.
The Medicaid "Look-Back" Period and Estate Recovery
Medicaid programs include a "look-back" period, typically 60 months (five years), during which they review a person's financial records. They look for assets that were transferred out of the applicant's name for less than fair market value. Such transfers can result in a penalty period of Medicaid ineligibility. This is why it is often best to consult an elder law attorney before assets are transferred.
What is Estate Recovery?
After a Medicaid recipient's death, the state is required by federal law to attempt to recover certain costs for services like nursing home care from the individual's estate. However, there are significant exemptions to this process. The state cannot recover from the estate if it is survived by a spouse, a child under 21, or a blind or disabled child of any age. Recovery may also be waived if it would cause undue hardship.
Comparison of Funding Sources for Long-Term Care
| Feature | Private Pay | Long-Term Care Insurance | Medicare | Medicaid |
|---|---|---|---|---|
| Funding Source | Resident's own income and assets | Insurance policy | Federal government (payroll taxes) | Joint federal and state government |
| Coverage Length | Unlimited, until funds are exhausted | Based on policy terms and limits | Up to 100 days for skilled nursing | Unlimited, as long as resident qualifies |
| Eligibility | No financial restrictions | Purchased in advance, based on health | Age 65+ or with certain disabilities | Low income and limited assets, based on state rules |
| Covered Services | All services in the facility | Varies by policy, can include nursing homes and home care | Primarily for short-term, medically necessary rehab | Long-term nursing home care, including room, board, and medical needs |
| Family Liability | Family not personally liable unless specified in contract | Family not personally liable | Family not personally liable | Family not personally liable for resident's costs |
What to Do When Funds Run Out
When it becomes clear that a nursing home resident can no longer afford their care, there are several steps to take immediately to secure their well-being and protect their family's financial future.
- Notify the Facility: Inform the nursing home administration about the change in financial status and the intent to apply for Medicaid. This starts the process and allows the facility to prepare for the change in payment method.
- Gather Financial Documents: Start collecting all necessary documents for the Medicaid application, including bank statements, investment records, deeds, and insurance policies. This is crucial for the eligibility review.
- Consult an Elder Law Attorney: An experienced elder law attorney can provide invaluable guidance, especially with navigating the spend-down process and preparing the Medicaid application to avoid costly mistakes.
- Engage with a Medicaid Planning Professional: Some law firms or specialized services offer "Medicaid crisis planning" to expedite the application for those in immediate financial distress.
- Assess Other Benefit Programs: Investigate whether the resident qualifies for Veterans benefits (like Aid and Attendance), Supplemental Security Income (SSI), or other local non-profit assistance programs,.
Conclusion
Running out of money for nursing home care is a frightening prospect, but it is not a situation without remedies. The key is to act swiftly and strategically. By understanding the legal framework, particularly the role of Medicaid and protections against family liability, and by working with legal professionals, individuals and their families can navigate this challenge. The transition to Medicaid can secure ongoing care for the resident while safeguarding the financial well-being of the family. Proactive planning, even in a crisis, is the most effective approach to ensure a seamless process and the continued care of your loved one.
For additional consumer protection information regarding nursing home debt, consult the Consumer Financial Protection Bureau (CFPB).
