Whether you’ve lived in a retirement community for years or are choosing a community for the first time, you may be concerned about paying for senior care. Assisted living can be very expensive, and costs continue to rise as Baby Boomers reach retirement age. Luckily, there are many options when it comes to financing assisted living.
In this blog, we’ll explore different ways to cover your costs, the differences between for-profit and not-for-profit communities, and what’s included in the price you pay for senior living.
Ways to Finance Healthcare and Assisted Living Costs
There are a wide variety of ways to pay for healthcare and some or all of your assisted living costs. Here are a handful of the most common.
While original Medicare typically doesn’t cover your assisted living costs, it does help pay for some or all of your medical costs. Medicare is available for people who are 65 or older and is broken down into four parts:
- Part A (hospital insurance) covers skilled nursing facility care, inpatient hospital stays, hospice care, and home health care. If you (or your spouse) paid Medicare taxes for a certain length of time while working, you probably won’t have to pay a monthly premium. If you don’t qualify for free Part A, you can buy it on your own.
- Part B (medical insurance) covers preventative services, outpatient care, some doctors’ services, and medical supplies. While some people are automatically enrolled in Part B, others have to sign up for it. You’ll pay a monthly premium for Part B, which is usually deducted from your Social Security benefit payments.
- Part C (also known as Medicare Advantage) is an all-in-one bundle alternative to original Medicare. Part C is offered by a private company that contracts with Medicare to provide Part A and Part B coverage. Many Part C bundles also include prescription drug coverage (Part D). Like private health insurance, you can choose from HMO and PPO plans, among others.
- Part D provides prescription drug coverage for individuals enrolled in original Medicare. You can also qualify if you’re enrolled in a Medicare cost plan, a Medicare private-fee-for-service plan, or a Medicare medical savings account plan.
Medicaid provides health benefits for eligible low-income adults and their children, pregnant women, people with disabilities, and seniors. Unlike Medicare, Medicaid is administered by individual states based on federal requirements. As a result, each state determines the type, amount, duration, and scope of services within federal guidelines. Individual states also determine your out-of-pocket spending requirements, which include copayments, coinsurances, and deductibles.
Mandatory Medicaid benefits include the following:
- Physician services
- Inpatient and outpatient hospital services
- Lab and X-ray services
- Home healthcare services
Optional Medicare benefits can include the following:
- Care management
- Physical therapy
- Occupational therapy
- Prescription drugs
The U.S. Department of Veterans’ Affairs (VA) provides a range of medical benefits and services for eligible veterans. Eligibility is based upon honorable discharge from full-time military service within certain wartime service periods. Veterans can receive nursing home-level care through the following three organization types:
- VA-owned and operated community life centers
- State-owned and operated veterans’ homes
- Community nursing home programs
The following services are included with veterans’ benefits:
- Help with daily tasks like bathing, dressing, making meals, and taking medication
- Round-the-clock nursing and medical care
- Physical therapy
- Comfort care
- Pain management
- Respite services for caregivers
Life Care Funding
Life Care Funding is a company that converts life insurance policies into long-term care benefit plans. Seniors who enroll are able to direct tax-free payments from their life insurance policies to cover housing and long-term care costs. Universal, term, whole, and group life insurances qualify, and value is based solely on the death benefit, rather than the cash value.
Skilled nursing home care, hospice care, memory care, home care, and assisted living all qualify for Life Care Funding. All health conditions are accepted, and there are no care limitations, waiting periods, or monthly premium payments.
Long-Term Care Insurance
Long-term care insurance is intended for things like personal and custodial care at home, a community organization, or another senior living community. You’ll choose from a range of care options and benefits, and your insurance company will reimburse you accordingly. Policy costs are determined by a variety of factors, including age, maximum per-day amounts covered, and any optional benefits selected.
In some cases, you might find that your life insurance policy is unaffordable, unnecessary, or no longer meets your needs. Life settlements allow you to sell your existing policy to a third party for an immediate cash payment. The policy must be sold for more than its cash surrender value, but less than its net death benefit. The buyer pays future premium payments and receives the death benefit when the policy matures.
Senior Lines of Credit
Senior lines of credit are designed to cover your monthly living expenses while you do things like sell your home or apply for veterans’ benefits. They’re usually unsecured, which means you don’t have to provide any collateral to the lending institution. Seniors and adult children can both take advantage of a senior line of credit, as long as it’s going towards financing a senior’s care. Funds are transferred to the senior living community automatically every month.
Long-Term Care Riders
These riders are attached to a life insurance policy and are designed to accelerate death benefits. In turn, the benefits pay for the costs of chronically ill individuals using long-term care services. Long-term care benefits are typically available until the death benefit has been exhausted. Any death benefits still available at the insured’s death automatically go to their beneficiaries.
For-Profit vs. Not-for-Profit Senior Living Communities
More than 80% of senior living communities are private/for-profit, and around 40% of them are national chains. However, not-for-profit senior living communities are also available.
What is a For-Profit Senior Living Community?
Both for-profit and not-for-profit communities provide comprehensive care for their residents. However, for-profit communities operate with the end goal of generating a profit. They answer to a board of directors and investors, who expect a certain return on investment.
What is a Not-for-Profit Senior Living Community?
Not-for-profit communities are typically faith-based and put all of their fees back into the facility itself. Many of them also work to improve their local area through fundraising and volunteer work, and may offer use of their facility to other not-for-profit organizations.
What’s Included in the Price You Pay for Senior Living Care?
It’s very important to discuss costs with each individual community when choosing one for yourself or your loved one. You may have asked yourself, “Does Medicare pay for assisted living?” In almost all cases, the answer is no. Medicaid and the Department of Veterans’ Affairs also usually don’t cover senior living costs.
While some communities offer bundled packages, others may charge a flat fee regardless of which services you use. The price you pay starts with the monthly rent you pay for your room, apartment, or home. In most cases, three meals a day are also included.
The other half of the equation is the services and amenities you take advantage of. The following services may be included in your room and board, or you may be charged ancillary fees:
- In-home emergency call systems, bracelets, or pendants
- Housekeeping and laundry services
- Maintenance services
- Basic cable, phone, and Internet
- Life enrichment and wellness programs
- Sanitary products (like Depends or pads)
- Hairdressing services
- Dressing, bathing, and toileting
- Medication management