(This is not my normal content on this blog, obviously, but I didn’t want to start a whole new blog just for this post.)

Hey everybody, I am a Gen Xer currently helping my parents get ready to go into assisted living. I also work at Public Aid, so I get to see some of the behind-the-scenes parts of the Medicaid process. I’ve learned a lot in the process. It’s massively a pain-in-the-ass, even if your parents are willing and ready to make that next step. I wanted to share what I have learned, so hopefully you won’t have to go through as much pain and trauma as I’ve seen others go through.

None of this information is secret or “insider information”. It’s all publicly available on various state and government websites. However, most people don’t think about elder care until the last minute, and once the time to help elderly relatives comes, people are usually at a loss as to what to do. I’ve had estranged or otherwise uninformed children of elderly parents show up at our office to apply for long term care and expect that their parent will find a bed that week, and it just doesn’t happen. In a lot of really important ways, it’s too late to do much of anything at that point except take what you’re given. I know no one wants to think about this stuff, but honestly–it’s best to plan ahead. This is going to be a long article, and it will probably make you sad and/or mad, so be prepared.

A couple of caveats: I only know about the Medicaid side of things; I don’t know a thing about financial investments or taxes or anything like that. Also, with the way things are going with the Federal government right now, I have no idea what Medicaid will look like this time next year, much less five or ten years from now. That said…

The Two Types of Elderly Individuals

In the course of my job, I have noticed that there are really only two types of elderly people in America. There are those who can afford to pay for elder care/assisted living facility out of pocket, and those who can’t. The end. Correspondingly, there are only real two categories of elder care: “Assisted Living Facilities”, where everything is paid out of pocket; and “Supportive Living Facilities (SLF)”, where at least some portion of the bill is picked up by the US government via the State Medicaid system. (There are also Department of Aging (DoA) services, offered through Medicaid, which aims to help keep people in their homes and out of a facility for as long as possible. Eventually, however, most elderly people will end up in a facility.) And, unless your elderly relative has at bare minimum $300K in combined resources and/or monthly income (in today’s money), they don’t have enough to pay out of pocket for Assisted Living. Assisted Living really is that expensive.

Also–one thing to keep in mind for both categories of people: availability. My parents are “Elder Boomers”–they are some of the oldest people of their generation. They are at the very beginning of the biggest generation of people to ever hit the Assisted Living system in America. Our elder care system has never seen the amount of people needing beds as they will be seeing in the next five to ten years. And far as I can tell, the government has failed to prepare for this problem. Facilities take a long time to build, and we should have started building a ton at least ten or fifteen years ago, particularly ones supported by Medicaid. However, as far as I know, we didn’t–and it’s going to make it increasingly harder to get your elderly relative into any kind of facility.

Here’s the financial and medical pros and cons of both types of facilities.

Assisted Living Facilities

Pros:

–If a person is at an Assisted Living Facility, the State does not care what they do with their assets or income. (From a Medicaid standpoint, at least; as I said, taxes and investments are not my specialty). If they have a lot of monthly income and/or resources, they can probably get into a very nice facility. Congrats! This is a nice position to be in.

–The facility will likely offer different levels of care, from least intensive up to the most intensive level of care a person could need. So, once moved in, they will likely not need to leave.

–There are considerably more Assisted Living Facilities than SLFs, so you will have a much wider selection to choose from. They are purely for-profit.

Cons:

–Assisted Living Facilities can often require several thousand dollars just to get on their waiting list.

–It takes a LOT of money to be in an Assisted Living Facility. Despite what online articles may tell you, in *my* mid-size town in the Midwest, at least, the average lowest monthly cost of an Assisted Living facility is $5000/mo. (Articles about my area state that the average monthly cost is $4345/mo; from recent research I’ve done myself, I disagree.) For any facility, check their website and see what that specific facility charges for various rooms and levels of care. It will almost *always* be higher than what any online article will state. It’s similar to buying a car. The stated price on the ad is always the “starting at” price for the bare-bones smallest room and lowest level of care. The cost most people will actually pay will likely be higher.

Keep in mind that this monthly amount does *not* cover things like Medicare F/health insurance premiums; car payments, car insurance payments or gas; life insurance; or most other “extras” you can think of. So, realistically, I’d round this number up to, say, $6000/mo for a anything resembling their previous standard of living. $6000/mo at 12 months a year = $72,000/year for elder care, BARE MINIMUM. For five years? $360,000. For ten years? $720,000. You get the idea.

So, unless your elderly relative has at last $360,000 in combined income and assets, they will not be able to afford an Assisted Living Facility. When someone runs out of money at an Assisted Living facility, they get kicked out and will have to try to get in an SLF, or hope that a relative can take them in.

Supportive Living Facilities (SLFs)

Pros:

–The State (via Medicaid) will pick up any monthly amount that the elderly person cannot cover themselves. Sounds great, right?

Cons: There are quite a few. Let me list them.

In no particular order:

–Medicaid has resource limits set by the Federal government. Income is good and all, but when it comes to SLFs, resources are the most important factor. (Anyway, if you had a high enough income, you’d be at an Assisted Living Facility, not an SLF.) Currently that limit is $17,500.  (Previously it was $2000 per individual, $3000 for a couple!). Resources include: bank accounts, CDs, IRAs, trust funds, any life insurance policies with a cash value, second homes/property, second cars (the first car is exempt), and any Van Goghs or other items you happen to have that have a large cash value. Pretty much ANYTHING that has a cash value is counted. If your resources are higher than the limit, the state will require that you pay all monthly facility fees out of pocket before Medicaid will kick in. This is called “spending down” your resources and this category of Medicaid is called a “DOA Spenddown–Resources”. (There are other categories of elderly Medicaid, but they do not apply here.)

Note: In addition to “spending down” one’s resources, the individual will have to “spend down” their monthly income. Functionally, this means that the state and facility will take and split all of a person’s monthly income except $120/per person (sometimes only $60/per person depending on the specific state or area). This remaining $120/month is the individual’s, as my Dad likes to say, “coke and hamburger money”; ie, discretionary spending, which will need to cover an individual’s cable bill, internet bill, and any other monthly bill a person has.

–Think you can give away all of your resources in order to avoid this Resource Spenddown? Wrong! The State has what it calls a “five year look-back period” in regards to calculating resources. If a person made any kind of transfer or withdrawal of more than $500/mo at any time within the five years prior to someone going into an SLF, that amount will count against them, and the State will not start paying on the SLF fees until that amount has been made up. This is meant to prevent people from “hiding” assets and getting State assistance paying for the SLF when, in reality, they themselves still have the ability to pay out of pocket. There are very few allowable resources transfers, most of which involve having a disabled adult child to care for. And yes, many banks report monthly balances for all elderly individuals who receive Medicaid, so if an individual doesn’t voluntarily report a resource, the State will likely find out eventually and be very mad.. What is very clearly NOT exempt is giving $ to your children or family members, or giving money to charity. The takeaway:  If you happen to have a large amount of resources, but not enough to pay for your entire Assisted Living experience out of pocket, give that money away at least five years BEFORE you might go into an elder care facility. (For more detailed information, search “Five Year Look Back Period for Medicaid”.)

–SLFs are few and far-between. My area has only three SFLs and over 20 Assisted Living Facilities. As I said, my parents are Elder Boomers—the oldest of the Boomer generation, which is the biggest generation in American history. Spots at SLFs are going to be filling up *fast* in the next few years. Get them on a list as soon as it looks like they may need to move to a facility.

–SLFs do not offer intensive support; Medicaid prevents them from doing so. If a patient needs more than one person assisting them for daily living, or if they become a danger to themselves or others, the State does not allow them to stay at a SLF. instead they will be moved to another facility (usually a nursing home or hospice) that can handle the higher level of care needed. This new facility will likely accept both Medicaid, and therefore the same resource limits will continue to be in place. Many SLFs already have working relationships with the nursing homes and hospices in their area.

Takeaway

The main take-away here is that unless your elderly relatives are rich, they will end up at a SLF. Plan ahead and have them check out different facilities, and get them signed up at whichever one they like best. Beds do not come open very often, so plan ahead and get them on the waiting list. If they have more than five years to spare, try to convince them to start “spending down” their assets now.

This probably the biggest–pardon my language–headfuck of them all in this process. The mindset change needed here to fully grasp their situation is truly staggering. Elderly people have spent more than fifty years thinking that they had to save “for the future”. At this point, the future is here. Credit scores no longer matter, and if they have’t saved at least $300k, for all functional purposes they might as well have not saved anything.)

I reiterate–with all of the current changes to Medicaid, however, some of this may no longer apply in a few years. But if it stays the same, this is the situation many people will be in.