If you have an elderly loved one with Alzheimer's or dementia, you’re first concerned with what to do to care for them. But the second, natural concern you’re going to have is, “How much will it cost?”
And that’s nothing to feel guilty about. The cost of senior care is a significant cause of concern for many American families, especially given recent studies that have indicated the price of private, residential senior care has risen 11 percent since 2011.
But there are ways to plan effectively for your loved one’s memory care. And if you know what to expect, you can develop a better care strategy. Here’s what you need to know.
1. Your loved one’s private insurance may have a lifetime limit and/or exclusions
If your parent or grandparent has just been diagnosed with Alzheimer’s or dementia, and has private health insurance and/or long-term care insurance, one of the first calls that should be made is to his or her agent or insurance provider.
It’s likely that his or her policy has a lifetime maximum on coverage. You need to know what that is, and when to expect that maximum will be reached.
In cases where the spouse is still living at home, outside the retirement community, additional assets may be exempt.
It’s also possible that there are specific coverage exclusions listed in the policy. You should review the coverage with your loved one’s agent so that there are no surprises when a charge is disallowed.
If you know what the limitations are on the coverage, you may be able to work with doctors and retirement care providers to avoid them altogether, without compromising the standard of care.
2. Early-onset dementia and Alzheimer’s patients may be able to withdraw from retirement accounts early
If your loved one is younger than 59½ and has been diagnosed with dementia, Alzheimer’s, Parkinson’s or certain other illnesses, he or she may be able to withdraw from an IRA or employee-sponsored retirement plan early, without incurring the usual 10 percent tax penalty. You should consult with a qualified CPA or financial professional who can guide you on the finer points.
Some pension plans also pay disability benefits to early-onset dementia or Alzheimer’s patients. If your parent is a member of a pension plan, you should check with the plan provider to find out what he or she might be eligible for.
Early-onset dementia may also qualify your loved one to receive Social Security disability income (SSI or SSDI) which, in turn, would provide Medicaid eligibility (after assets are spent down).
3. Speaking of spend downs . . .
Medicare and Medicaid require that your loved one spends down assets before full coverage kicks in. Some assets — the home (if a spouse or disabled adult child is still living there), furnishings and personal belongings, one personal vehicle, pre-paid burial assets and a life insurance policy (with a face value up to $1,500) — are protected and not currently subject to spenddown requirements. And spenddown requirements themselves may vary from state to state.
But investments like stocks, bonds and annuities, cash reserves, other properties and additional vehicles must be divested. And there are strict restrictions on “gifting” assets to other family members in order to avoid spending them down — restrictions that result in stiff sanctions when you’re caught.
In cases where the spouse is still living at home, outside the retirement community, additional assets may be exempt. For example, the spouse may retain his or her own retirement accounts or certificates of deposit, without needing to spend them down, plus 50 percent of other the couple’s countable assets.
Best course of action to prepare? Consult a lawyer or CPA who is well-versed in Medicare/Medicaid requirements as they pertain to asset spend downs.
4. Community resources may be available to help ease the financial hardship on your family
Check with your local chapter of the Alzheimer’s Association or on the federal government’s Eldercare Locator to find information and links to resources that might be available in your area. Some of those might include reduced-cost or free respite care programs, Meals on Wheels deliveries, in-home care and more.