Paying For Assisted Living: Financial Assistance for Senior Living
Paying For Assisted Living: Financial Assistance for Senior Living
Assisted Living Costs & Fee Structures
Most assisted living communities offer residents the choice of all-inclusive or fee-for-service pricing. All-inclusive means that a single monthly fee covers rent, meals and any additional services a resident chooses such as housekeeping or transportation. Fee-for-service means a resident pays only for those services they use. Typically, if a resident intends to use the full suite of services an assisted living residence offers, it is less expensive to choose the all-inclusive model. If a resident will only require certain services or will use outside assistance for certain services, then the fee-for-service approach offers better cost savings. A more detailed review of assisted living pricing models is available here.
In 2019, the projected, average monthly cost of assisted living nationwide is $4,000. Alzheimer’s and dementia care in assisted living (called Memory Care) costs, on average, an additional $800 – 1,200 per month, for a monthly total of $4,800 – $5,200. Costs for assisted living vary dramatically from state to state. In the South and Mid-West, the approximate average monthly costs are from $2,800 – $4,500. In the Northeast and on the West Coast, $4,200 – $6,050 per month is the norm. See a table of the average cost of assisted living by state.
Financial Assistance for Assisted Living
Medicaid and Assisted Living
Financial assistance from Medicaid for assisted living comes through several different types of Medicaid programs. The most common of which are Medicaid Waivers, also called Home and Community Based Services (HCBS) Waivers and 1915(c) Waivers. The number of states offering these waivers has increased rapidly in recent years, and assistance will possibly be available nationwide in the near future. However, some states are moving to a Medicaid managed care model and away from Medicaid Waivers. These states continue to provide the same level of benefits for assisted living, but do so as part of their managed care programs instead of through waivers. Another type of Medicaid program is referred to as State Plan Personal Care or Personal Assistance Services. This is a regular Medicaid benefit (an entitlement, meaning anyone who is eligible to receive services is able to do so) that pays for personal care and allows beneficiaries to receive that care in assisted living communities.
States are increasing the level of assistance they offer to persons in assisted living because this living environment is less expensive than skilled nursing homes, and therefore, less costly to the state. Having said that, Medicaid’s assisted living benefits are very inconsistent. For example, in some states, Medicaid pays for only personal care services in assisted living. In other states, the size of the community is regulated. Some states limit size to small, adult foster care-type homes, while other states limit assisted living to larger residences serving twelve or more persons. Still, other states have no regulations at all related to the number of residents. Another variation in policy relates to room and board. While Medicaid does not pay for room and board, states have found ways to assist. For instance, some states limit the maximum amount that can be charged or provide non-Medicaid assistance to Medicaid-eligible persons.
A complete list of states whose Medicaid programs help with the cost of assisted living and their eligibility requirements is available here. One can also learn more about qualifying for Medicaid assistance here.
Veterans’ Programs for Assisted Living
There is financial assistance for assisted living for veterans in the form of a pension called the Aid and Attendance Benefit. As of 2021, this program can provide assistance up to $1,936 / month for a single veteran and up to $2,295 / month for a married veteran. However, eligibility is complicated and there can be extensive wait times for approval. Details of the program, eligibility requirements, and tips for expediting the approval process are available here. Veterans who may be eligible for both Medicaid and Aid and Attendance might want to review this comparison of the two programs.
A second option for veterans can be used in independent living communities, but not assisted living communities. The Veterans’ Directed Care program gives the participating veterans considerable control and latitude with how their care funds are spent. Under this program, personal care attendants can be paid to provide assistance to veterans residing in independent living. It is worth noting that the phrase “independent living” means different things in different states. Here we are referring to a senior living community that does not provide personal care supportive services, but may provide recreational activities and group meals.
State Non-Medicaid Programs
Many states have recognized that providing financial assistance to frail, elderly individuals for assisted living is less costly to the state then having them go into a Medicaid-funded nursing home. This is usually preferable for the individual and their family as well. Unfortunately, not every state offers these programs. These programs, which in many shapes and sizes, offering different benefits. However, all the programs in one way or another help to offset the cost of residing in an assisted living community. For example, some of these programs provide cash assistance that is not specifically designated for assisted living, but can still be used for that purpose. Other programs provide a benefit supplement for beneficiaries who reside in assisted living instead of at home. Still others are state-owned, assisted living residences with pricing well under market rates.
Seniors and persons with disabilities can receive free assistance finding assisted living residences that meet both their care and their financial requirements. Get Help Here.
Original Medicare / Medicare Advantage
* Original Medicare does not pay for assisted living, which means it does not cover room and board or personal care assistance. However, Medicare Advantage may pay for personal care and/or other supportive services in assisted living facilities.
It is important to clear up a common misperception regarding Medicare’s coverage of assisted living costs. Medicare does not pay for assisted living, including the cost of room and board and personal care. However, medical expenses incurred at an assisted living residence may be covered by Medicare just as they would if the medical procedures occurred in a doctor’s office, hospital, or at one’s home.
Medicare Advantage (MA), on the other hand, may cover the cost of personal care assistance, as well as other supportive services in assisted living facilities. On April 2, 2018, the Centers for Medicare and Medicaid Services (CMS) announced the expansion of supplemental benefits to include supplemental healthcare benefits. (This is in addition to the supplemental benefits, such as hearing, vision, and dental, that many MA plans already offer.) In the past, benefits primarily meant for “daily maintenance” were not covered by Medicare Advantage plans. However, as of 2019, MA plans may provide “daily maintenance” benefits for those who reside in an in-home setting, given services are medically appropriate for the individual in question and are suggested by a licensed provider. While CMS does not offer a clear definition of an “in-home setting”, it is thought at the time of this writing that assisted living facilities are considered as such. Examples of possible services that may be available via one’s MA plan (and relevant to persons in assisted living) include medical and non-medical transportation and assistance with daily living activities, such as bathing, dressing, eating, laundry, and light housecleaning.
Social Security and Assisted Living
Social Security, in the strictest sense, does not pay for assisted living as Social Security benefits go directly to the individual. However, in roundabout ways, state-specific Social Security programs can help families with the cost of assisted living. Typically, states help by increasing or supplementing the amount of Social Security benefit the beneficiary receives if they reside in an assisted living community or an adult foster care home. This is a complicated and state-specific subject, so much so that a lengthy article has been dedicated to this subject here.
Other Ways to Pay for Assisted Living
For many Americans, assisted living fees are paid out-of-pocket using funds from a combination of resources. Follows is an examination of each possible source with links to more detailed information.
* Did You Know?
93% of assisted living residents are satisfied with their overall quality of life, their level of independence and the level of personal attention they receive from staff.
Reverse Mortgages & HELOCs
Reverse mortgages and home equity lines of credit (HELOC) are two options homeowners have for using their homes to help pay for assisted living. However, these options are not available to all homeowners unilaterally, nor are they necessarily appropriate for every family or a sound economic decision. To use a reverse mortgage, for example, the individual must be married and their spouse must continue to live in the home as reverse mortgage rules state that a home must be owner-occupied. Home equity lines of credits do not have this limitation. They also have lower associated costs and can be a good option for couples of mixed ages who would not be eligible for a reverse mortgage. Eligibility requirements and a detailed discussion of the pros and cons of each option is available at the following links: Reverse Mortgages & Home Equity Lines of Credit.
Life Insurance Benefits and Conversions
There are five different ways life insurance policies can be used to pay for care while the policyholder is still alive. However, not all five options are available to all policyholders nor do they necessarily make economic sense for everyone. That said, life insurance is one of the most under-utilized of the self-payment options for assisted living.
- Life settlements are an option in which a policyholder sells their right to collect the death benefit from their policy and they stop making monthly premium payments in exchange for an immediate lump sum of cash.
- Viatical settlements are similar to life settlements but are designed for terminally ill individuals. Typically, viatical settlements fetch a higher buyout for the policy than a life settlement.
- Accelerated death benefits are an option that enables terminally ill individuals to receive a portion of their death benefits in advance of their death.
- Death benefits loans are loans taken against the cash value of the policy, not the death benefit. These must be re-paid or the death benefit will be reduced.
- Life insurance conversions directly convert the value of a policy in exchange for care. For example, an individual with a $100,000 policy may exchange that for several years in an assisted living or senior living community. Of these five options, it is likely life insurance policyholders will receive the greatest value for their policy using this approach.
A detailed discussion of the pros, cons, costs and benefits of each of these options are available at the following links: Life Settlements, Viatical Settlements, Accelerated Death Benefits, Death Benefit Loans, Life Insurance Conversions.
Assisted Living Loans
Assisted living specific loans, when used appropriately, provide families with great flexibility. Assisted living loans are designed for short term financial gaps typically for periods of less than 2 years. They are ideal when families have unexpected assisted living costs and are waiting for other resources to become available. For example, if an individual is moving into assisted living and is waiting for a home to sell and they are uncertain how long that process will take, a loan is a very good option. Another example is when a veteran has applied for the Aid & Attendance benefit. The approval process can be lengthy but once approved, the benefits are paid retroactively to their application date in a lump sum. The lump sum is then used to pay off the assisted living loan. Read a detailed analysis of the costs and benefits of assisted living loans here.
Long Term Care Insurance
A small number of families are fortunate enough to have long term care insurance, perhaps 5% of American seniors. However, for those who do not have long term care insurance and have a need for care, it is no longer possible to purchase these policies. A more detailed discussion of long term care insurance is available here.
Other Assistance Options
* Assisted living costs can vary by 50% even in the same city or town. Finding affordable assisted living is the easiest way to reduce costs. Use our free service to find affordable care in your area.
If one thinks broadly about the phrase financial assistance for assisted living, then several other options exist. There are government housing programs for seniors from HUD that function much like assisted living communities. Read more here. There are also a variety of tax credits and deductions related to assisted living. While these do not provide assistance directly, they can reduce a family’s overall tax burden thereby freeing up additional financial resources to be put towards the cost of assisted living. Most relevant are the Elderly and Disabled Tax Credit and the Federal and State Dependent Care Credits. Finally, we offer a series of tips for lowering assisted living costs.
Assisted Living Financial Resource Locator Tool
On this website, we offer an interactive tool that consists of a series of questions which are used to narrow down the many options in our financial assistance program database to only those that are relevant to one’s specific situation. One can search for all programs that provide financial assistance for assisted living or discover new programs that might enable them to afford in-home assistance so they can remain living at home. Start here.
Developing a Financial Plan for Assisted Living
Since many families pay for assisted living from their savings, they are in a state of continuously diminishing resources. Most assistance programs determine eligibility based on an individual’s resources. Therefore, the assistance available to an individual is constantly changing. In other words, the longer a person resides (or is projected to reside) in assisted living, the more assistance options that become available to them.
For this reason (and others), it is advantageous to develop a long term financial plan when considering assisted living. Doing so has the dual benefit of ensuring a comfortable and consistent aging process for your loved one while at the same time maximizing your family’s assets and resources.
The creation of a financial plan for assisted living is a complicated process and one that must accommodate various health scenarios. Fortunately, there are a variety of different resources available to help families with financial planning for assisted living and each of the resources has its pros and cons.
Public Benefits Counselors – local agencies such as Area Agencies on Aging (AAA) and Aging and Disability Resource Centers (ADRC) often have benefits counselors on staff that help families understand their financial options for assisted living, but do not actively engage as financial planners. While they do not charge for their assistance, they are often under-staffed and unable to provide adequate long-term planning. They tend to be very well-versed in local programs, but may not have as much financial planning experience. Find your local AAA or ADRC.
Geriatric Care Managers – GCMs help families create and implement long term care plans, and as part of that service, some will help with the financial planning side. As GCMs are typically paid for out-of-pocket, one can expect a higher level of attention than they might receive from a public benefits counselor. Families tend to contact GCMs only after the need for care has become apparent, and therefore, GCMs may not be in the best position to do long term planning. Often GCMs come from nursing or public health backgrounds and do not have extensive financial experience. Find a Geriatric Care Manager.
Eldercare Resource Planners – ERPs are specialists in developing financial plans for assisted living. They differ from care managers in that they typically come from a financial background instead of a healthcare background. They are paid out-of-pocket but can often pay for themselves in the financial assistance resources they discover for their clients. They are significantly less expensive than elderlaw attorneys, but they cannot perform some of the legal procedures which only attorneys can. Learn more.
Elderlaw Attorneys – the most expensive and most thorough option are elderlaw attorneys. This type of attorney and their staff can provide a one-stop shop for assisted living financial planning, but their hourly rate may prove cost-prohibitive for some families. A shortcoming is an elderlaw attorney may not be knowledgeable about local assistance options for lower income families. One can search the National Academy of Elder Law Attorney database here.
State-by-State Assisted Living Costs and Affordability Index
The cost of assisted living care can be high and there exists a significant range in the cost in different states. As an approach to finding lower cost, senior living residences, some families relocate to residences outside of their primary geographic areas. This table contains the average, projected cost of assisted living for all 50 states and D.C. for 2020. In addition, it contains our assisted living affordability index* which considers the cost of assisted living in a state relative to that state’s median income. This index was created to illustrate the high variability of assisted living costs relative to the cost of living. The state’s rank out of 51 (includes Washington D.C.) is in the 4th column.
|2021 Projected Assisted Living Costs by State|
|State||Annual Cost of Assisted Living||Assisted Living Affordability Index. Lower #s are more affordable.||Affordability Index Rank|
|District of Columbia||$72,000||1.395348837||43|
*Data provided by Genworth Financial, Inc. (NYSE:GNW) and the US Census Bureau.