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What Happens When a Resident Runs Out of Money in Assisted Living or a Nursing Home?

Emptying bank accounts to pay for a nursing home or assisted living could prove to be a disaster for the resident and their family. It’s a problem more and more Americans are facing with the price of nursing homes in the U.S. ranging from $7,000-14,000 month and life expectancy increasing. The consequences of a resident having to move out of a nursing home or assisted living could be traumatic, but there are ways to avoid that scenario.

Can a Nursing Home or Assisted Living Community Discharge a Resident for Non-Payment?

The short answer is yes, both nursing homes and assisted living communities can discharge residents for lack of payment. The rules vary by state, but in general they are the same for both – nursing homes and assisted living facilities have to give the resident or the appropriate family member/guardian a written notice 30 days prior to the date of the discharge and both must provide a discharge plan. That plan is required to include the location to which the resident will be moving, a summary of the resident’s mental and physical health, a thorough post-discharge care plan, and information about all necessary medications and medical equipment. Furthermore, the location to which they will move must agree that they will admit the resident.

Medicaid can help in these situations. However, while the facility is required to give a 30-day notice, 30 days isn’t long enough to apply for Medicaid.

It is possible to appeal the discharge to buy more time, but this may not work, nor will it necessarily buy the family sufficient time. Ideally, a family would start working on the Medicaid application a year before the bank accounts will be empty and paying out of pocket is no longer feasible. A Certified Medicaid Planner can be a great help in this planning process. To schedule a free consultation with a Certified Medicaid Planner, start here.

Some Medicaid-approved nursing homes will allow residents to stay who have just begun the process of applying for Medicaid when they run out of money to pay the facility out of pocket. Persons awaiting approval are known as Medicaid-pending. Medicaid benefits, in some states, can be retroactive for 3 months preceding the date of application which will allow the nursing home to recoup some or all of the money which they are owed. However, this is not the case for the vast majority of assisted living residences.

Does Medicaid Cover Nursing Homes and Assisted Living Facilities?

The simple answer here is most nursing homes do accept Medicaid, but most assisted living facilities do not. Medicare (as opposed to Medicaid) will only pay for a nursing home and only some of the cost and for a maximum of 100 days. Medicare is not a long-term care solution.

As the name implies, Nursing Home Medicaid covers the cost to live in a Medicaid-approved nursing home for those who qualify medically (exhibit a need for nursing-home level care) and financially (meet sate limits on assets and income).

It’s rare, and it varies by state, but Medicaid will also help pay qualified applicants pay for assisted living facilities through another long-term care program, Home and Community Based Waivers. In California, for example, there’s the Medi-Cal Assisted Living Waiver. In Texas, there’s the STAR+PLUS Waiver that covers assisted living as well as adult foster care. Florida’s Statewide Medicaid Managed Care Long-Term Care Program can help with assisted living costs, as does New York’s Managed Long Term Care Program Waiver. Illinois has the Waiver for Supportive Living Facilities, which includes care for people with Alzheimer’s disease and other dementias.

These waiver programs have limited space, waitlists and often complex requirements, so consulting with a Certified Medicaid Planner before applying for any of them is highly recommended.

Prepare in Advance for the Medicaid Application

Properly completing a Medicaid application takes time – much longer than the 30-day notice care facilities are required to give. Collecting all the necessary documentation and filling out the application can take days, weeks or longer, and then it usually takes 30-90 days for the application to be processed after it’s been received. And this presumes no errors are made by the applicant or by the application review team.

To get a jump on the process, one can start to gather financial documents that verify details of all assets (like savings accounts, checking accounts, stocks, bonds, investments, certificates of deposit and vacation properties) and income (like employment wages, alimony payments, Veteran’s benefits, pension payments and Social Security Income). One can also move money to protected trusts or annuities.

Another good idea is to make sure all adult children are aware of the resident’s decisions regarding their long-term health care and are aligned on how to handle the situation moving forward. Giving one of these adult children, or another family member, Power of Attorney so they can gather all the necessary documentation if the resident becomes unable to do so is also advisable.

One should also know ahead of time if the nursing home or assisted living facility is Medicaid-approved. This way, the resident and their family will know whether they will have to leave if they run out of money to pay the facility out of pocket. It’s also good to know if the facility is Medicare-approved. Medicare will pay for some skilled nursing long-term care, but only for 100 days and only then if the stay in the skilled nursing facility is an extension of a previous hospitalization that Medicare covered. Again, it’s important to note that Medicare will not pay for a nursing home for ongoing care.

It’s important, too, to understand the nursing home or assisted living facility’s rules and regulations around dismissals or evictions, and what policies are in place for residents who suddenly can’t pay. Some nursing homes may send residents to hospitals and then refuse to let them back, but some states prohibit this.

Are Family Members Responsible for Unpaid Nursing Home Bills?

For the most part, no, but you should familiarize yourself with the rules in your state and in the nursing home your loved one is using. Most states stopped enforcing filial support laws with the advent of Medicaid in 1965, but not all. Pennsylvania brought back its support laws in 2005 and there’s a 2012 case of a man who had to pay $93,000 nursing home bill. Some states allow nursing homes to file civil court cases for financial support or cost recovery.

However, private-pay nursing homes and assisted living residences are much more likely to enforce their contracts involving the family members of the residents who are negligent in their fiscal responsibilities. This clause is common in the admissions agreements of private nursing homes and assisted living residences, so families should read those carefully.