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How to Keep Nursing Home Costs from Devouring your Life Savings
Happy elder couple sitting on couch petting their dog
Lawrence A. Cappiello writes a check each month for about $12,000 to pay his wife’s nursing home costs.

“Two years ago, I was worth half a million dollars,” the 91-year-old Town of Lockport man said. “In less than two more years, our savings will be gone.”

Cappiello suffers from a case of nursing home sticker shock, though he says he should have known better.

Before he retired 25 years ago as a professor at the University of Buffalo, he taught an introductory course on health care and human services that included the costs to consumers.

“You could tell by the trends at that time where this thing was going. It was just going to escalate out of control,” Cappiello said.

The state Health Department estimates the average annual cost of nursing home care in the Buffalo region at about $123,000, but it can be substantially more depending on the facility. Cappiello’s monthly checks to Elderwood at Lockport will add up to $144,000 by the end of this year.

But he could have protected hundreds of thousands of dollars from the nursing home.

Though complex, existing laws provide people with a pathway to protect their assets, become legally poor and qualify for publicly funded Medicaid to cover nursing home bills.

To qualify for Medicaid payments for nursing home care, a single New York State resident age 65 or older can own no more than $15,450 in nonexempt assets, according to the New York State Department of Health.

Elder law experts say the key to protecting one's life savings is to take steps years before nursing home care is needed. They recommend:

  • Signing over the deed of your home to your children or others who would inherit it in your will. The transaction can stipulate you have life use of the home.
  • Establishing an irrevocable trust that upon death transfers the house to the beneficiaries. Again, life use can be stated.
  • Giving individuals one's savings and other financial assets.

To protect these assets, transfers must occur more than five years before applying for Medicaid nursing home coverage. If an applicant owns financial assets or has given them in the Medicaid five-year “look back," there is a chance that they may still qualify for Medicaid benefits.

“That’s why planning is so important and that transfers be made in accordance with the legal requirements,” Cheektowaga elder law attorney Chuck Beinhauer said. "There are steps that can be taken to preserve some of the gifted assets."

Needs versus inheritances

Many older people are not jumping at the chance to give up what has taken them a lifetime to secure, according to the experts.

“Most parents want to leave a legacy to their children. Parents also want to be able to support themselves in old age,” Buffalo elder law attorney Bruce D. Reinoso said.

Reinoso, a former chairman of the Erie County Bar Association’s elder law committee, said older people need to consider what matters to them before deciding whether to take steps to protect their assets from nursing home costs.

“It depends on the people who are important to you, your facts and your goals. It’s all common sense, but the laws are extremely complex in this area,” Reinoso said.

An irrevocable trust, he said, allows for the transfer of a house, stocks, savings and other assets, but once it is established it cannot be changed. “Trusts are complicated and expensive to create and to operate,” Reinoso said.

For most people, their biggest asset is their home, and that can be protected by transferring ownership to the intended beneficiaries without establishing a trust, according Terrance Emmens, also a Buffalo elder law attorney.

While the five-year look back is generally the rule, there are exceptions.

“A sick spouse can move assets to a healthy spouse to make the sick spouse lawfully poor and eligible for Medicaid,” Emmens said. “There is no look back or penalties for interspousal transfers.”

Protecting parents' home

Kathleen Cattrall says she and her sibling sought assistance from Emmens after her mother in 2012 entered Our Lady of Peace, a Lewiston nursing home.

The Niagara Falls house owned by Cattrall’s parents was first transferred to her father, who then signed the house over to his four children, with a clause stipulating that he retain use of the residence for the rest of his life.

By taking the mother’s name off the deed, nursing homes could not require that asset be used to cover her care, the daughter said. Her mother died in 2015.

But should Charles Cattrall, 92, require admission to a nursing home within a year, the house he transferred to his children four years ago could become an unprotected asset because a year remains in the five-year look back.

Emmens, Kathleen Cattrall said, is now assisting the family in applying for Community Medicaid to cover the cost of a home health care aide and other assistance for her father to make it possible for him to remain at home, instead of care in a nursing home.

Unlike nursing home Medicaid coverage, Community Medicaid does not have a look-back period for asset transfers.

Becoming legally poor

For married couples, there are ways to protect additional assets when one spouse needs nursing home care.

Spouses can transfer and protect personal savings, cash value life insurance policies, annuities, bonds, stocks, and other assets, according to elder law attorneys.

“In other words, the other spouse gets to keep a house, as much as $120,000, plus a car, prepaid funeral expenses and qualified retirement accounts,” Emmens said.

But if the spouse still living in the community is receiving distributions from retirement funds or any other type of income, the law requires a portion of that money  pay for nursing home costs when that spouse's monthly income level exceeds $3,160.

Emmens says that when spouses or other family members consider protecting assets they often express concerns over what type of nursing home will admit someone on Medicaid.

“They ask if their spouse or their mother or father will get less care because they are legally poor and now on Medicaid,” Emmens said. “The answer is nursing homes cannot treat people differently whether the government pays or they are private-pay.”

Nursing homes rated low in performance by the federal government often have larger percentages of Medicaid residents compared to the higher-ranked facilities. But Emmens said the law prohibits facilities from discriminating against Medicaid recipients.

“I place people in nursing homes every single day. They have no money, they are Medicaid eligible, and these homes are four- and five-star rated homes,” Emmens said. The federal government uses a star rating system to rank nursing homes, with one star the lowest and five stars the highest.

Long-term care insurance

Becoming poor is not the only way to blunt the cost of a nursing home.

There is the option of buying a long-term care insurance policy.

According to the American Association for Long-Term Care Insurance, a 55-year-old New York State resident would pay about $100 a month for a policy. That would entitle the policyholder to $164,000 in immediate coverage, if needed. By 85 years of age, the amount would increase to $256,000.

Beinhauer, the elder law attorney, pointed out that long-term care insurance payouts are generally not made in a lump sum, but dispersed monthly and may not equal the monthly nursing home bill.

“The nursing home resident is responsible for the difference,” he said.

Amherst financial adviser Paul Coleman described long-term care insurance as a viable option for those who can afford it, but noted the rising costs of premiums.

“Premiums are increasing rapidly with no end in sight. Less and less insurers are offering policies, and the policies that are being sold are becoming less robust as the years go on,” said Coleman of Level Financial Advisors.

Amherst resident Larry Abate knows this firsthand. When he and his wife bought policies 11 years ago, he says they were assured state insurance officials rarely permitted premium hikes.

"We started paying about $3,000 a year; now we're up to a little over $4,000," Abate said.

Jesse Slome, executive director of the American Association for Long-Term Care Insurance, said some premiums have risen because of older policies that included unlimited lifetime benefits and 5 percent annual increases in the value of benefits. At the same time, he said, there has been a higher-than-anticipated number of claims.

About a dozen insurance companies in the country offer long-term care policies and premium prices are all over the board, Slome said, urging consumers to carefully compare policies.

About 8 million Americans have long-term care insurance. Half of the claims, he said, are for in-home assistance, usually in the form of home health care aides.

“I refer to long-term care insurance as nursing home avoidance insurance,” Slome said. “Most people get long-term care in their own home and are very likely to only spend a short period of time at the very end of their life in a nursing home.”

But for most people, including those who must first exhaust their assets, Medicaid serves as the nation's long-term care insurance for nursing home costs.

Paying for his wife

Lawrence Cappiello says he recently transferred ownership of his house to a son to protect that asset should he one day end up in a nursing home.

“I should have transferred it four or five years ago but you don’t think ahead,” said Cappiello, explaining that, though he is 91, it is never too late to take precautions.

Of spending hundreds of thousands of dollars in savings to pay for his wife’s nursing home care, he said: “There are two ways to look at it. That is why you saved your money. The other is, you hoard your money to give to your kids, who may or may not need it.”


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