When Private Funds Run Out: The Risk of Eviction
When an individual's personal savings or long-term care insurance are exhausted, they are typically known as “private pay” residents. As soon as a resident becomes unable to pay, the nursing home will start procedures to address the issue. The facility must provide adequate written notice of non-payment, often 30 days, before proceeding with a transfer or discharge. During this time, residents and their families must act quickly to find a solution.
The process can be traumatic for the resident, especially if their care needs are complex. During this critical period, facilities often have a social worker or discharge planner who can assist, but families should not rely solely on them. The ultimate responsibility lies with the resident and their family to secure a new funding source or find alternative care.
The discharge process typically involves:
- Written Notice: The facility issues a notice stating the reason for eviction (non-payment), the effective date, and details on appealing the decision.
- Relocation Plan: The nursing home must assist in arranging alternative care. This could involve transferring the resident to another facility that accepts Medicaid, if they become eligible.
- Legal Protections: Residents have rights that prevent illegal or abrupt evictions. State and federal laws regulate this process, and a Long-Term Care Ombudsman can be a valuable resource for advocacy.
Medicaid as the Primary Solution
For most people who run out of funds for nursing home care, Medicaid becomes the main source of assistance. Medicaid is a joint federal and state program designed for low-income individuals and families, and it is the largest single payer for long-term care in the U.S.
Medicaid eligibility criteria are strict and include:
- Income Limits: Most of the applicant's income, with the exception of a small personal needs allowance, must be contributed toward the cost of care once approved for Medicaid. Income limits vary significantly by state.
- Asset Limits: Most states have strict asset limits, typically around $2,000 for an individual. However, some assets are exempt, such as the primary residence (with certain equity limits), a vehicle, and personal belongings.
- Five-Year Look-Back Period: Medicaid reviews financial transactions, such as gifts or asset transfers, made in the five years prior to applying. Any uncompensated transfers during this period can trigger a penalty period during which Medicaid will not pay for care.
The Medicaid “Spend-Down” and Crisis Planning
If an individual’s assets are over the state limit, they can participate in a “spend-down” program. This involves using excess funds for medically necessary care or other qualifying expenses until assets fall below the eligibility threshold. In a crisis situation where care is needed immediately, an elder law attorney can help structure assets legally to achieve eligibility faster.
Alternative Care Options and Funding Sources
While a nursing home may be necessary, less expensive alternatives exist, and exploring them can be a good strategy to manage costs and maintain independence for as long as possible.
Options to consider include:
- Home and Community-Based Services (HCBS): Many state Medicaid programs offer waivers to pay for long-term care services provided at home or in the community. These can cover home health aides, adult day care, and other non-medical support to help seniors age in place.
- Program of All-Inclusive Care for the Elderly (PACE): For frail seniors who need nursing home level of care but can live safely in the community, PACE offers comprehensive medical and social services.
- Assisted Living with Medicaid Waivers: In some states, Medicaid waivers can help cover the service costs of assisted living, though they generally do not cover room and board.
Comparison of Funding Sources
| Medicaid | Medicare | VA Benefits | Long-Term Care Insurance | Personal Savings | |
|---|---|---|---|---|---|
| Covers Long-Term Nursing Home Care? | Yes, for eligible individuals in Medicaid-certified facilities. | No, only short-term skilled nursing facility stays (up to 100 days) following a qualifying hospital stay. | Yes, for eligible veterans via VA facilities or contracted homes, with potential copays. | Yes, depending on the policy, but can be expensive and have strict eligibility. | Yes, but can deplete quickly, especially for long stays. |
| Eligibility Requirements | Low income and assets; medical need for nursing home level of care. | Age 65+ or certain disabilities; qualifying hospital stay for SNF coverage. | Veteran status, specific service history, disability rating, and/or financial need depending on benefit. | Health underwriting required; can be difficult to qualify if health is poor. | None, other than having the funds available. |
| Major Downside | Strict financial requirements; potential five-year look-back penalty; must give up most income for care. | Very limited coverage for long-term needs; high coinsurance for extended stays. | Can be complex to apply; potential waiting lists; varies by benefit. | High premiums, especially when purchased later in life; strict coverage limitations; possibility of premium increases. | Exposes all assets to long-term care costs; can be exhausted quickly. |
Leveraging Additional Resources
Beyond government programs, several other financial strategies can help cover the gap or extend resources for senior care.
Veterans' benefits
Veterans or their surviving spouses may qualify for the Aid and Attendance benefit, which provides additional income to help pay for long-term care costs. This benefit is an add-on to the regular VA Pension and has specific medical and financial requirements. The VA also operates Community Living Centers (VA nursing homes) and partners with community facilities to provide care.
Life insurance and annuities
Some life insurance policies have riders that allow for an "accelerated death benefit," which lets the policyholder access a portion of the death benefit while still alive to cover long-term care costs. Alternatively, a life settlement involves selling a policy to a third party for cash. Annuities with long-term care riders can also provide a stream of income for care expenses.
Home equity
For homeowners, a reverse mortgage can convert home equity into cash payments to fund care. However, this is a loan against the home and reduces the equity available for heirs. It's a complex decision that requires professional guidance.
Charitable care and benevolent funds
Some non-profit or faith-based nursing homes have benevolent care funds to assist residents who outlive their assets. It is worth asking facilities about such programs, but availability can be limited.
Proactive Planning and Next Steps
Ignoring the issue of long-term care costs is not a viable strategy. Early planning, ideally well before a crisis, is the best way to secure care and protect your assets. Families should start by gathering financial information and discussing potential care needs.
Action Steps in a Financial Crisis:
- Do Not Panic: Acknowledge the situation and know that options exist.
- Contact the Facility: Notify the nursing home that private funds are running low and inquire about their Medicaid application process. Work with the discharge planner.
- Seek Professional Help: Engage an elder law attorney specializing in Medicaid planning immediately. They can provide legal advice and navigate the complex application process effectively.
- Explore All Options: Review all potential funding sources, including VA benefits if applicable, and investigate alternatives like PACE or HCBS waivers.
- Utilize Resources: The Eldercare Locator can help find local agencies and resources for seniors and caregivers.
For more information and resources, visit the Administration for Community Living website at https://acl.gov/programs/aging-and-disability-networks/eldercare-locator.
Conclusion
While facing the need for a nursing home without adequate funds is a daunting prospect, a clear path forward exists. The key is to understand that government programs like Medicaid, alongside alternatives like VA benefits and home care waivers, can provide crucial financial support. By being proactive, seeking professional legal and financial guidance, and knowing your rights, it is possible to secure the necessary care without facing the worst consequences of financial hardship.
