Elder Care Planning – to the Last Dime and the Last Breath
“How much money is there? What are the income and assets?” may sound like a cold questions, but they are almost the first questions I ask my clients. As a Geriatric Care Manager and Elder Care Specialist, I offer crisis intervention, elder care planning and long term care management to families overwhelmed by elder care needs. Typically it is the panicked baby boomer children who enter my office because mom or dad has had a sudden severe stroke or perhaps shows signs of early Alzheimer’s Disease. “What do we do? Where do we go?” they anxiously ask.
Most often, my clients have not been aware of their parents’ medical conditions or increasing care needs. Often they are only partially aware of their parents’ financial resources. And most families are clueless to what a (KQED) Nightly Business Report broadcaster called the “cascading cost of custodial care.”
Families are shocked to hear that in-home caregivers cost $15.00–$20.00/hour and that an “OK” but not luxurious home in the Bay Area costs approximately $5,000.00 a month for a shared room. Naively, many families think Medicare will pay for long-term custodial care. Or perhaps they have heard of Medi-Cal and assume it is easy to access and offers excellent care. And most families are unaware of the benefits and drawbacks of the nation’s elder care system. Just this week, I consulted with a worried nephew. The nephew confused a simple Medigap policy with long term care insurance and assumed the policy would pay for custodial care.
Furthermore, families rarely understand that finances, more often than illnesses, dictate elder care choices. Families who are near the Medi-Cal need level and families with millions of dollars are equally in the dark. As we plan, I urge families to consider the monthly and yearly costs of their choices, and to look to the future to see how long their money will last. I always refer out to elder law and estate planners as we plan and choose specific care options. Let’s look at three hypothetical clients at different income levels and also consider current trends towards Medi-Cal usage.
Client A is 86 and requires 24/7 care. She has had numerous CVAs or strokes; she cannot perform independent personal care, sit up alone or feed herself. She is mentally alert but extremely Aphasic. She is easily agitated and awakens frequently at night, crying out, panicking, and demanding attention. But financially, she is lucky. Her spouse left her with 4 million dollars in assets, a (paid for) $900,000.00 home and income of $10,000.00 a month. Her son promised her he would never put her in a nursing home.
This family hires a home care agency and a Geriatric Care Manager to supervise the live-in help. The live-in caregiver costs $250.00 a day or approximately $7,500/month, averaging $90,000.00 a year. However, even with medication, this woman does not sleep through the night and demands frequent nightly attention. According to home health care agency employment rules, live-in caregivers can only be awakened 2 times a night. Thus it is necessary to pay for 3 shifts a day and consider the nighttime care as a regular shift. Essentially, this requires hiring at the hourly rate: $20.00/hr, 24 hours a day. This staggering cost is $480.00 a day, and approximately $14,880.00 a month or $178,560.00 a year. While this cost is what I call “Ritz-Carlton elder care,” it does happen.
And the actual cost to this family is more. In all home care cases there are the ongoing costs of home maintenance as well as the supervision of the caregivers, medical concerns and the home care plan. This family can afford the “Ritz-Carlton” plan of care. But they must look closely at how fast they are spending their assets.
With an income of $120,000.00, approximately $50,000 a year would have to be pulled from the 4 million in assets. With Client A’s medical prognosis, it is assumed that she will die well before her assets are used up.
Client A is loosely based on a real person and this is, in fact, what happened. If you are wondering if estate planning was done, yes, it was. The decision to spend the family assets on Client A’s care was a definite “yes.” It was decided that, although a private room in an excellent nursing home would be less expensive (perhaps $10,000 a month), and less effort and overall cost for her family, home care would provide a better quality of life.
Now let’s take Client B. She is 68 and has suffered one minor stroke, but she still lives independently. Her income is $2,000.00/month and assets: $330,000.00. Her (paid for) house is worth $300,000. Again the family has agreed to spend the assets and perhaps sell the home, if necessary, to pay for Client B’s care. They want the best care and have chosen a Continuing Care facility. Client B has just enough money to buy into this comprehensive level of care and purchase a two bedroom apartment. Say the entrance fee is $80,000.00 a year and the monthly dues are $3,000.00 a month. She will spend about $12,000.00 a year from the left over $250,000 in assets. It is estimates that her assets will last 20 years. At that time she can sell her house to cover the remaining monthly income payments.
Now let’s take Client C. She has suffered several severe strokes and needs 24/7 care. She lives with her spouse and has less money. Her spouse is frail and cannot provide 24 hour intense personal care. They earn $2,000.00/month in income and have $110,000.00 in savings. They own their home. This family cannot afford to pay for the “Ritz-Carlton” level of home care or for a Continuing Care facility. Client C will have to go to a nursing home.
The family selects a skilled nursing facility with both private pay and Medi-Cal beds. They decide to pay for 4 months of care at $5,000.00/month. Thus they will spend about $20,000.00 for her care. $90,000.00 will be left in savings. Then they will access Medi-Cal, under the Spousal Impoverishment Act to pay for her future care. When she enters the home, she will fill out forms appropriately to insure that her home remains an exempt asset. Therefore, her husband will have assets and his home with which to plan for his future needs.
In the first two cases, you may wonder, “Was estate planning done? If so, what in the world was the estate planner thinking?” These families did work with estate planners and they chose not to shelter large sums of money to access Medi-Cal, or as a Wall Street Journal (WSJ) article of 2/25/03 says, “Get Poor on Purpose.” They chose quality of life for their elders over preserving family assets for future generations.
Although my clients make their own choices in this regard, I admit to a bias. I am generally not in favor of sheltering large sums of money in order to qualify wealthy families for Medi-Cal. I believe the Medi-Cal “world” is for those with genuinely low financial resources. The WSJ mentions a recent study which found that “22% of the $47 billion in Medicaid monies spent for skilled nursing home care in 2001 went to families who could afford to pay for months or years of their own nursing home care.”
I believe the Medi-Cal system is, even in good economic times, overburdened. Medi-Cal now threatens to cut funding by 15% to elder care programs and other programs that support the genuinely poor. I serve on the board of an Alzheimer’s day care program that provides much-needed care to poor and working-class families. This program genuinely needs Medi-Cal dollars. Now it is scrambling to find funds to make up for the anticipated Medi-Cal budget cuts.
Furthermore, frequently the Medi-Cal level of care is not the best quality care. Families would be wise to spend a day in a Medi-Cal nursing home to closely assess the environment before attempting to shelter large funds to get mom into a Medi-Cal home.
Excellent elder care planning requires close attention to many details. While it is obvious to those of us in the “trenches” of elder care planning that financial resources are key, many families do not understand this. Families must be educated. And while we commonly follow our clients’ dictates regarding finances and care choices, let’s leave the Medi-Cal system for those who really need it. Let’s strive to provide frail elders with the same quality of care we will want some day.
Response to Elder Care Planning
I am writing in response to “Elder Care Planning — to the Last Dime and the Last Breath” by Care Manager Mary B. Moorhead, which appeared in the Spring 2003 CANHR Legal Network News.
First, thank you for helping educate your readers about care management. I have had more clients thank me for referring them to care managers, over the years, than for any other single thing I have done in my career. Every attorney should know who they are and what they do, so they can take at least THAT set of painful issues and decisions off the shoulders of clients who are 1) trying to manage care at home, or thinking about doing so, 2) struggling with placement possibilities, 3) running into problems with care in a facility. The Care Manager’s skills in assessing the situation, figuring out what is needed and how to get it, and monitoring things on an ongoing basis are terrifically helpful.
One particular part of Mary’s article caught my eye. In the fourth paragraph from the end, she says “I am not generally in favor of sheltering large sums of money in order to qualify wealthy families for Medi-Cal. I believe the Medi-Cal ‘world’ is for those with genuinely low financial rosources.”
If the only groups caught in the Medi-Cal maze were the wealthy and people with “genuinely low financial resources,” things might be easier than they are. Most of the peaple who come to me for education about Medi-Cal, in the midst of the crisis that caused them to think about the expense of nursing homes for the first time in their lives, are the middle class, Tom Brokaw’s “Greatest Generation”, and their children. They survived the Depression, fought WWII, went to school on the GI Bill, bought a little suburban house for $7,000 in 1947, and saved up a modest nest egg. They are neither wealthy nor poor, yet they are on the way to being poor, much to their shock, because of illness. In addition to the emotional components of dealing with failing health, they are frustrated about the financial implications, which of course, no one ever told them about. They thought, if they thought about it at all, that Medicare and/or their Medigap policies paid for long term care. I am confronted daily, and have been for 20 years, with their powerful sense of unfairness about it all.
I quite agree that the situation is unfair. First, it discriminates based on condition. If mom falls over dead of a heart attack at Safeway or while playing bridge, her children inherit whatever she has, intact. If she deteriorates slowly over many years with Alzheimer’s Disease, they don’t. Second, they are finding out how things work when it is, essentially, too late to adequately prepare. If we told peaple from birth that they would be on their own in old age, except for whatever Medicare can do for them when the time comes, that would be one thing. But we don’t. We never tell them that, because we have allawed a false sense of security to grow from the notion that American society, and the government that springs from it, considers quality health care to be a right, not a privilege (which it clearly does not). When these peaple were young, old peaple died quickly of acute conditions, and that’s what they hope will happen to them. Who doesn’t? But that’s not what we call planning.
Given that Congress hasn’t been able or willing to come up with a system that is fair and works reasonably well for everyone, including the Greatest Generation and their children, we have to deal with what we’ve got. What we’ve got, I think we all agree, is a mess, and would never be our first choice. However, if it allaws the modest assets of a given individual to be partially preserved for the spouse and children in certain situations, I have to explain how that works. I also, I feel, have to explain the disadvantages of being on Medi-Cal rather than paying privately, and I have to discuss the conflict between inheriting Dad’s assets intact and obtaining the best possible care with maximum flexibility for as long as it might be needed. Once I have done all that, the person sitting in the client chair decides how to proceed. I am not a cheerleader for Medi-Cal planning, but it’s an option — a choice among several marginal choices in a very difficult situation.
Priscilla Camp, Esq. is an attorney in private practice in Oakland, CA