Financial experts agree that one of the most difficult issues for aging adults is the need for long term care at some point in their lives. The statistics are pretty daunting; approximately 70% of adults will need long term care assistance.1 The problem is that the cost for these services is extremely high and Medicare and even Medical (or Medicaid as it is known in other states) generally will not cover anything other than very limited cases of skilled nursing home care. So, what’s a middle-class individual to do when they need these services but are afraid they’ll run out of money at some point?
First a few startling facts. Assisted Living Facilities (ALF) in Napa, where a majority of our clients live, average around $5200 per month but can easily go up to $9000 or more per month, depending on the services needed and the type of assisted living facility chosen2. Let’s assume an average cost of $6000 per month for long term care services in an ALF as of 2024. Meanwhile, the average retirement savings for those 75 and older is just over $462,000.3 If those savings are conservatively invested and just match the average inflation rate for assisted living facilities and other long term care services, assumed to be 3%, then the entire retirement savings would be exhausted after just 6.5 years. If there’s a spouse who relies on those savings to pay for their retirement living expenses, then the retirement nest egg will be gone even faster. Thus, there’s a real possibility that an individual needing an ALF may run out of money at some point while living there. What do they do then?
This is where state and federal laws and regulations come into play and become quite murky. Assisted Living Facilities, also known as Residential Care Facilities for the Elderly, or RCFEs, are generally privately owned and run. Many are profit-seeking ventures, although a few may be not-for-profit. As part of the admission process, a potential resident will often be required to sign paperwork accepting the specified rent quoted and promising to pay this rent to remain in the facility. Generally, an individual will not be accepted to an ALF if they are on or are expected to soon be on social assistance of some sort. Family members should take heed to be honest about financial resources when meeting with admission staff, but to also avoid discussing possibilities of using social assistance to pay for rent.
If and when the resident later runs out of money and no longer able to pay the agreed upon rent, a series of laws become applicable to determine if that individual can be evicted or remain in the facility. If the individual applies for Medical and is accepted, they may be able to take advantage of the Medical Waiver Program (MWP) offered in California. However, Medical only pays for Skilled Nursing Home care, not assisted living facilities and not all counties fall under the MWP. For instance, just 17 out of 58 counties in California are covered under the program and our resident county of Napa is not one of them. In addition, if an individual signs the Medical Waiver form, they may be assigned to a facility some distance from where they now live.4
Alternatively, If the individual is eligible for Supplemental Security Income from the Social Security Administration, then the individual cannot be evicted, according to California’s Department of Social Services, under California Code Regs. tit. 22, § 87464(e). However, the services provided to the individual may then be reduced to “basic services”, meaning the individual may need to move to a semi-private or shared room if they were previously in a private room.5,6There is also the possibility that a person qualifying for SSI may also be eligible for the Optional State Supplement, if living in an ALF. In California, the supplement pays approximately $400 per month above the federal SSI payment.7
If an individual running out of money while at the ALF has only Social Security benefits coming in as their income, then the process may come down to the individual facility where the person lives and the amount of those Social Security benefits. In 2024, the maximum income an individual would be able to have and qualify for SSI would be $1971 per month.8 If the individual has income above this level, they will not qualify for the SSI or the protection afforded under Title 22 and may find themselves in a lengthy process of fighting eviction, using a variety of state laws that protect people from eviction. Some other facilities may be willing to accept Social Security benefits as payment for remaining in the facility, but that too may come down to negotiations between the facility, the resident and their family.
The prospect of needing long-term care and having inadequate resources to pay for the services needed is an important and complex topic. It is one that is top of mind for our Federal and State governments who see the aging of the Baby Boomer generation and potential explosion of costs incurred for providing long-term care to seniors. Individuals with the means to do so should consider having some sort of insurance to protect against running out of money. Those without the means to purchase insurance or the ability to self-insure will inevitably be forced to rely on such government programs, laws and regulations as may be available when their assets are all gone.
1Richard W. Johnson, Urban Institute
2Caring.com, Senioradvice.com
32022 Survey of Consumer Finances
4John Lord, Napa Long Term Care Ombudsman program
5Legal Information Institute, Cornell Law School; justiceinaging.org
6Chris Arnhold, Licensing Program Analyst, CDSS/Community Care Licensing
7Payingforseniorcare.com/social-security
8ssa.gov/ssi/eligibility