In my practice as an elder law attorney, I often work with families facing a difficult transition: a loved one’s decline has become so severe that they can no longer provide care at home. It’s a sobering moment when we realize that our parents - who have always been our caregivers - need care themselves.
The emotional challenge of moving a parent to a nursing home is often compounded by a daunting financial reality. With monthly costs around $15,000, many families find themselves asking: "How can we possibly afford this?”
THE STANDARD NURSING HOME ADVICE
Nursing homes typically offer what seems like a straightforward solution: spend down the patient’s life savings to $2,000, and then MassHealth will cover the care costs for life. While this advice isn’t wrong, it is incomplete and costly for families.
Let me share a recent case that illustrates why.
A REAL-WORLD EXAMPLE
We recently worked with a niece whose aunt, in her early 90’s, needed nursing home care. The situation looked like this:
The aunt had a monthly income of $5,900 from Social Security and various annuities;
She has approximately $100,000 in savings;
The nursing home charged about $13,000 a month;
The niece, acting as power of attorney, was paying about $7,000 monthly from savings to cover the shortfall.
The nursing home advised continuing this approach until the savings were depleted - about 14 months - at which point the aunt would qualify for MassHealth. They offered to handle the MassHealth application “for free.”
A BETTER STRATEGY: THE STRATEGIC ANNUITY
We recommended a different approach using an insurance annuity. Here’s how it worked:
the aunt used her $100,000 in savings to purchase an annuity from an insurance company;
the insurance company agreed to pay $2,300 monthly, for 3.5 years;
the aunt immediately qualified for MassHealth, without a 14-month waiting and spenddown period;
THE FINANCIAL BENEFITS
This strategy created two significant advantages:
Immediate rate reduction:
Private pay rate: $13,000 per month
2. MassHealth rate: $8,400 per month
3. Monthly savings of $4,600;
4. Total savings over 21 months: $95,000
Protected Assets - when the aunt passed away after 21 months:
MassHealth’s claim was minimal ($4,200)
The remaining annuity payments of $44,000 went to the family
THE TRUE COST OF “FREE” HELP
When nursing homes offer to handle MassHealth applications for free, it’s worth considering what that really means. In this case, following their advice would have cost the family $44,000.
Every family’s situation is unique, and there are often multiple approaches to handling long-term care costs. Before following a nursing home’s financial advice, consider consulting with an elder law attorney who can outline all available options and help you choose the strategy that best service your family’s interests.