State law generally requires assisted living facilities to disclose all of the costs of care to an incoming resident. Aside from this disclosure requirement, each assisted living facility generally is at liberty to set its own rate for rent and services. Because facilities have such great flexibility in how and what they charge, residents must make sure they fully understand the admission agreement’s payment provisions.

It’s important to note that a facility may raise its rates from time to time. This may affect a resident’s ability to budget for the future. Residents should ask the facility how often the facility has raised fees in the past and when it expects to increase fees again.  Remember, however, that state law probably gives the facility great freedom to raise its rates at any time, as long as written notice of 30 or 60 days is given in advance.

Facility Pricing Options

“All-Inclusive” Pricing

There are different ways that facilities can charge residents for the services they receive. One way is referred to as the “all-inclusive” method. This means that rent and any additional services are included in a set monthly fee.

“A la carte” pricing

Another method charges residents a flat rate for a certain set of basic services, and then charges an additional fee for extra services. This option is referred to as “a la carte” pricing. The term “a la carte” means “according to a menu that prices each item separately.” With this type of pricing option, residents pay only for those services they receive.

For example, in addition to the basic monthly rent, a facility may have a schedule of charges based on resident usage of services or facilities. These additional charges may include personal laundry, television, transportation costs, and medical supplies, as well as assistance with personal care needs such as bathing, grooming and dressing.

Other Charges

In addition to monthly rent and service charges, some facilities may charge a security deposit. Others may charge a non-refundable entrance or "community fee." Some deposits might not be refundable, even if the resident moves elsewhere, or never moves in at all. Many facilities charge an additional fee if payment for services is received late. Fees may vary from a set fee to an additional charge for each day beyond the date payment was due. Some facilities charge an annual percentage rate assessed daily on unpaid rent.

Private Payment

Assisted living is largely a private-pay business. Most residents living in assisted living facilities pay for expenses from private money sources. These sources can include income from pensions and retirement, as well as money from savings and investment accounts. Some families help with covering the costs associated with assisted living. In other cases, residents use the proceeds from the sale of real estate and personal property.

Long Term Care Insurance

Long-term care insurance is a special type of insurance plan that can help pay for assisted living. Long-term care insurance policies usually pay a certain sum of money to the facility for a certain period of time.

The cost of long-term care insurance varies widely depending on the policy. There are many different options to choose from, and the price often is determined by the age, medical condition and services needed by the resident applying for the policy. Usually, the younger the applicant is, the less expensive the policy. Many policies have set rates that do not increase as the insured ages. However, rates can change for other reasons, so there’s no guarantee that the rate for coverage will remain constant.

Some individuals may not be eligible to purchase long-term care insurance. Residents already living in a long-term care facility, those who have already been diagnosed with a condition that will require long-term care, or those over age eighty five may not be eligible to purchase any type of long-term care policy.

Because claims under long-term care insurance may not be filed for a long time, applicants must thoroughly research and understand the exact terms of the policy, including the rules affecting when the policy actually takes effect. Principal dangers are that the insurer will no longer be in business when care is needed, or that the premium costs will increase dramatically between when the policy is purchased and when long-term care is needed.

Public Payment

Regardless of the source, the costs involved can make paying for assisted living prohibitively expensive for many people. Today, there are a few public assistance programs available for eligible residents, though the majority of residents in assisted living must continue to pay for services with their own private money. These programs are discussed in the following sections addressing Medicare, Medicaid and Supplemental Security Income.

Introduction to Medicare and Medicaid

“Medicare” and “Medicaid” sound alike and, as a result, each program often is confused for the other. The programs are very different, however. Each requires that a beneficiary be either at least 65 years old or disabled, but Medicare eligibility is based on the work history of the individual or the individual’s spouse, and Medicaid eligibility is based on financial need. Another important distinction is that Medicare is a federal program and, as a result, Medicare rules are the same no matter where the Medicare beneficiary lives. Medicaid, on the other hand, is a program run by each individual state under general rules set by the federal government. As a result, Medicaid services and eligibility rules can differ significantly from state to state.

Medicare Home Health Care

The Medicare program is a federal health insurance program for individuals 65 and over and certain disabled individuals under 65. Eligibility for Medicare requires that either the individual or the individual’s spouse has worked enough months to qualify for Social Security benefits.

Medicare covers home health care, and the same Medicare rules apply whether the individual is at home or in an assisted living facility. The Medicare program can pay for home health care only if the beneficiary is considered “homebound,” based on the reasoning that a resident who is not homebound could travel to a hospital or clinic for routine health care. An assisted living resident is considered “homebound” if leaving the facility is a very difficult process. In determining whether a resident qualifies as “homebound,” the resident is not penalized for leaving the facility to receive health care treatment or to attend an adult day care program. Also, attending religious services does not limit a resident’s ability to be considered homebound.

The Medicare home health care benefit generally requires a need for skilled nursing care, or physical or speech therapy. Nursing care is considered “skilled” if a nursing service requires the expertise of a licensed nurse. For example, treatment of a wound or administration of an injection are skilled nursing services that qualify for Medicare reimbursement. On the other hand, bathing a resident, or helping a resident get dressed, are services that do not qualify for Medicare reimbursement.

Medicare covers only those skilled nursing facility services that help a resident recover from an acute illness or injury. Medicare will not cover permanent, daily skilled nursing care. Generally nursing care must be needed six days a week or less. If nursing care is needed every day, Medicare can pay only if the daily nursing care will be needed for only a limited time-period – three or four weeks, for example.

As mentioned above, therapy services also must be “skilled” in order to qualify for Medicare payment. The expertise of a licensed physical therapist or certified speech therapist must be required.

If a resident requires skilled nursing services or skilled therapy, the Medicare home health benefit also may be able to provide the part-time assistance of a home health aide, as appropriate given the resident’s care plan. Also, the Medicare home health benefit may provide medical supplies (such as catheters) or durable medical equipment (such as walkers), if the supplies or equipment also are part of the care plan.

Therefore, practically speaking, the Medicare program does not cover day-to-day assisted living costs. However, Medicare can be a useful benefit that may pay for certain services provided at the assisted living facility by a home health care agency, the same way that Medicare would pay for those same services if the individual resided in his or her own home.

Medicaid Eligibility Rules

Unlike Medicare, Medicaid is not concerned with the work history of an individual or the individual’s spouse. Rather, Medicaid eligibility depends on the individual’s financial need.

Medicaid is available only to an individual who is at least 65 years old or is disabled. An individual who receives Supplemental Security Income (SSI) is eligible for Medicaid automatically. Otherwise, an individual can be eligible for Medicaid when his or her available savings fall below approximately $2,000 (the exact amount varies from state to state; remember, Medicaid eligibility rules can differ significantly from state to state). The value of the home is not counted against this savings limit. Also not counted are a necessary automobile, clothing, household goods, a burial plot, and other important items.

Unless SSI-eligible, an individual generally is required to pay a monthly deductible before Medicaid will cover the individual’s medical expenses. The deductible is calculated based on the individual’s income, and generally will allow the elder to retain monthly income of approximately $500 to $900, depending on the state.

Eligibility standards are eased somewhat for married couples, in recognition that two cannot live quite as cheaply as one. The savings limitation is raised somewhat – likely to $3,000 or $4,000, depending on the state – and the amount of monthly income to be retained (for couples not eligible for SSI) is raised to the neighborhood of $600 to $1,100 monthly, also depending on the state.

More generous eligibility standards apply if a married individual lives in a nursing home, because Medicaid rules take into account the fact that the resident’s savings and income may be needed by the spouse living at home. A couple may be able to retain approximately between $20,000 and $90,000 of savings, and between $1,600 to $2,300 of monthly income, depending on the state. Similar standards may apply to a married assisted living resident, but only if the state’s Medicaid program covers assisted living services under a Home and Community-Based Services waiver (see below for more details), and only if the Medicaid program has chosen to extend its nursing home eligibility standards to assisted living services.

Medicaid Payment for Personal Care Services

In assisted living, Medicaid will not pay for “room and board”: living quarters, meals, utility bills, etc. However, state Medicaid programs may pay for personal care services provided in the assisted living facility. Examples of “personal care services” are assistance provided to residents in bathing, dressing, eating, cooking, or cleaning. Personal care services in general are less medical than home health care. The services usually are provided by individuals with relatively little training, at least in comparison to the years of training required of nurses and therapists

Usually, in order to be covered by Medicaid, personal care services must be approved by a doctor and be part of a comprehensive plan of service individualized to meet the resident’s needs. Personal care services can be provided through an agency (similar to how home health services are provided by a home health agency), but increasingly personal care services are provided by individuals unaffiliated with an agency.

In most states, Medicaid-funded personal care services are available only to those residents who receive care through a Home and Community-Based Services (HCBS) waiver. The term “waiver” is used because, for home and community-based services, the federal government has waived the general requirement that all Medicaid services be available equally to any eligible individual within the state. Because this rule has been waived, the state Medicaid program can choose to offer home and community-based services only to a limited number of eligible persons. An HCBS waiver is meant to keep individuals out of nursing homes to the extent possible. Accordingly, HCBS waiver services are available only to those individuals whose medical or physical condition otherwise would have required nursing home care. In general, the services provided through the HCBS waiver must be no more expensive than what nursing home care would have cost for that same resident.

In a relatively small number of states, eligibility for HCBS waiver services is not required for receipt of personal care services. In these states, it is not necessary that an elder have a medical need for nursing home services, and the state must provide personal care services to all eligible Medicaid beneficiaries, without any waiting list. In many cases, however, the state Medicaid program will not authorize the number of hours of personal care services that the elder feels that he or she needs.

Medicaid Coverage for Home Health

The Medicaid program pays for home health care, but the Medicaid home health benefit is used much less frequently than the Medicare home health benefit. The reason is that, under federal law, a Medicaid program can cover home health care only for elders who have a medical or physical condition that otherwise would require nursing home care. By contrast, as explained above, Medicare home health care benefits do not depend on the beneficiary needing nursing home services. A Medicare program can cover home health care if a beneficiary is homebound and needs skilled nursing or therapy services.

Supplemental Security Income (“SSI”)

The Supplemental Security Income (“SSI”) program guarantees a very limited income to individuals who are aged, blind and/or disabled, and who have available savings of no more than $2,000. As is the case in determining Medicaid eligibility, “available savings” for SSI purposes does not include the value of the home, a necessary automobile, clothing, household goods, a burial plot, or other important items.

The federal SSI benefit rate is very low -- $564 for 2004 -- so many states provide an additional state supplement for SSI recipients residing in assisted living facilities. Even with this state supplement, the total monthly income of SSI-eligible residents is extremely low. Since this total amount of income is so low, some states require that assisted living facilities accept a limited monthly rate from SSI-eligible residents, so that the resident can keep a small amount of money for personal needs.

Residents apply for SSI benefits at the local Social Security Office. Eligibility depends on the resident’s savings and income. SSI workers are available by calling (800) 772-1213.

Medications

Many assisted living residents are able to self-administer medication. This means that the resident can take the medication with no assistance from facility staff.

In some states, a licensed healthcare professional must first assess each resident to determine whether self-administration is appropriate. Usually, the resident must demonstrate that he or she can correctly identify medications (for example, by color or shape) and have the ability to question changes in medication routines.

Some assisted living residents are unable to take their own medications, due to physical or mental limitations. They may need help with opening medication bottles and taking out the medication, or in figuring out what pills to take at what time. Facility staff can help if the resident is able to self-direct medication administration. This means that the resident is aware of what the medications look like and knows when they should be taken, but the facility staff can assist by reminding the resident to take the medication, opening the bottles, or reminding the resident when a prescription needs to be refilled.

If a resident is unable to self-administer or to self-direct medication administration, the assisted living facility staff is responsible for administration. In some facilities, the person assisting the resident with medications may not be a nurse or other trained, licensed health care professional. Some states allow facilities to hire a licensed healthcare professional who “delegates” the medication responsibilities to facility employees who are not nurses.

Regardless of who is responsible for medication administration, the medications must be given in accordance with the resident’s service plan. Generally, the facility must provide a procedure for documenting the medication administration, including the procedure to follow should an error occur. The facility may be required to keep medication records that contain some or all of the following information: the resident’s name; the name of the prescribing practitioner; the medication name; the time, dose and dates administered; the method of administration; and signatures of the person who administered the medication. Some states require that the medication record contain a list of possible side effects and reactions, or any precautions that should be taken when administering.

The resident who self-administers medications may be permitted to keep the medications in his or her own room, unless safety is a factor (for example, the resident shares a room with someone.) Otherwise, all medications are required to be stored in a locked, central storage area for safety reasons. If the medications are locked in a central area, the facility must provide each resident timely access to the medications.

The facility usually must have a procedure for returning medications to the resident if the resident moves or is discharged, in addition to a procedure for destroying medications that are unused and outdated.

Hospice Care in Assisted Living

What is Hospice Care?

Hospice care is designed for individuals who are terminally ill. Hospice care offers the dying patient the ability to remain in familiar surroundings, often with a greater sense of peace, comfort and dignity. As compared to home health care, hospice focuses less on treatment of illness, and more on the patient’s comfort and emotional health at the end of life.

A team of many different healthcare personnel provides the hospice care. The team usually includes a physician, a nurse, a home health aide, a social worker, a chaplain and in some instances, a volunteer. This interdisciplinary hospice team works together to develop a plan of care that will help alleviate the patient’s pain providing the necessary medications, medical supplies, and equipment.  

Although hospice services can be extremely helpful, the decision to choose hospice care can be very difficult for a resident and his or her family. The decision to give up active treatment for the terminal illness is obviously influenced greatly by the patient’s culture and religious beliefs. Hospice care is unique because it provides personalized care and services to patients and their families. The patient and family are assisted in the necessary preparation for death in a way that is appropriate for them.

Hospice Care in an Assisted Living Facility

Although hospice care often is thought of as something provided in the patient’s home, hospice care also can be provided in an assisted living facility. Though a terminally ill resident may require care that ordinarily would require the resident to move to a nursing home, the goal of hospice care is to allow the resident to remain where they are most comfortable. Therefore, many states have special rules that allow assisted living residents to receive hospice care and remain in the facility, provided certain conditions are met. Since most hospice care is provided by outside hospice agencies, rather than the facility itself, these conditions usually require the facility and hospice agency to work together to provide the best possible end-of-life care.

Many states require assisted living facilities to obtain special permission for admitting or retaining residents in need of hospice care. Depending on the state, permission is granted for a particular resident or residents only, or for an entire facility. If permission is granted for a particular resident, the facility must provide the state licensing agency with the appropriate information about the resident, including a service plan that details how hospice care will be provided. Generally the hospice agency and the assisted living facility at a minimum are required to have a written agreement that describes the responsibilities of each.

Hospice agency staff provides scheduled services and, in addition, usually is available twenty -four hours a day, seven days a week, to meet patients’ unscheduled needs. Often, hospice staff trains the appropriate facility staff on how best to manage the resident’s care between hospice visits. The hospice agency also may involve the resident’s family and friends in the plan of care.

Hospice care should not replace anything that a facility otherwise is obligated to do. Instead, hospice services should supplement and improve upon the facility-provided services.

Paying for Hospice Care in Assisted Living

Hospice care is covered under Medicare, Medicaid, most private insurance plans, and other managed care organizations. However, most hospice care is paid for by Medicare Part A, and provided through Medicare-certified hospice agencies.

Medicare rules allow payment for hospice care only if a doctor has certified that the patient is expected to die within six months. If the patient in fact does not die within the six months, hospice care nonetheless can be continued indefinitely, as long as the doctor continues to certify that the resident is expected to die within the following six months.

By choosing the hospice service package, a patient gives up services related to the treatment of the terminal illness. When a Medicare beneficiary chooses hospice care, he or she is turning down Medicare reimbursement for active treatment of the terminal illness. However, a beneficiary still can use Medicare for other medical care.

Assume, for example, that a Medicare beneficiary has cancer that is likely to cause her death within six months. If she chooses the Medicare hospice benefit, Medicare will not pay for radiation or chemotherapy to combat the cancer. The hospice benefit, however, will pay for medication to suppress or manage the pain caused by the cancer, as well as the other items and services included in the Medicare hospice benefit.