Medicare, the national health-insurance system for the elderly, covers
hospital and physicians' services for acute illnesses. Contrary to what
many beneficiaries believe, it pays only for relatively short nursing-home
stays directly related to an illness or injury that requires hospitalization.
Medicare pays for a maximum of 100 days of skilled-nursing care during
each benefit period. Skilled care includes specific medical services.
Medicare does not pay for custodial care, the kind of care many infirm
people need to bathe, dress, eat and go to the toilet if that's the only
type of care they require. For a patient who enters a nursing home directly
from a hospital and who needs skilled-nursing care, Medicare covers the
costs for the first 20 days. For days 21 through 100, Medicare pays all
but $89.50 a day, which is paid by the beneficiary. That amount changes
each year. Many nursing homes charge between $100 and $200 a day. To cover
that gap and others in Medicare, elderly people should consider buying
Medicare-supplement insurance upon turning 65.
It's not easy to qualify for skilled-nursing benefits.
A patient must be admitted to a Medicare-certified facility usually within
30 days of a hospital stay that lasts for at least three days. And a physician
must order that nursing care is required every day for the same condition
that caused the hospitalization. If those conditions are met, Medicare
covers not only the daily rate, meals, drugs and supplies, but also skilled-nursing
services.
For those patients who qualify for skilled-nursing benefits, Medicare
covers intravenous and tube feedings, injections of insulin, insertion
of catheters, tracheostomy aspiration, training in self-injections and
diet for diabetics, and rehabilitation services like speech, occupational,
and physical therapy. Rehabilitation therapies are covered if they're required
at least five days a week, if they're restorative, and not simply to maintain
functioning, and if improvement continues. Payment stops if there's no
further improvement.
Many other services, such as routine preventive skin care, routine care
for incontinence and assistance with activities of daily living, do not
qualify someone for a skilled-nursing stay. But if that person otherwise
qualifies based on a need for skilled care, those services are covered
as well.
MILKING MEDICARE
Nursing homes have learned how to milk the Medicare system in ways that
not only contribute to the financial crisis Medicare faces but that can
effectively deprive people who don't qualify for Medicare benefits of needed
care. Nursing homes aim to keep all beds full. So when openings arise,
as they do daily in many facilities, admissions personnel try to fill them
as quickly as possible with residents who will contribute most to the bottom
line. That usually means Medicare patients get preference.
In the scheme of nursing home finance, Medicare pays a lot, Medicaid
pays a little, and patients ineligible for either program pay what the
market will bear or go without. "The reimbursement system absolutely
rules the care," says Anne Hart, the ombudsman for Washington, D.C.
Nursing homes designate some of their beds as "Medicare certified"
and try to increase the number of covered services the residents in them
get. (Medicare allows homes to allocate to those beds as many other costs
as it can justify, thinking that's where the heaviest care is needed.)
Many nursing homes have begun to turn themselves into facilities
focusing almost exclusively on Medicare-covered services. Other nursing
homes are marketing units for "subacute" care: special wings
or floors that provide hospital-level care. Even hospitals are setting
aside skilled-nursing wings as a way to continue receiving Medicare money
once patients move out of acute-care beds. It's unclear if subacute units
are marketing-inspired locations with care not much different from that
in other parts of a nursing home.
Higher Medicare rates buy greater access to nursing homes for beneficiaries
who qualify for skilled services, keeping out many who don't. "We
take Medicare primarily," said the admissions director at Regency
Woods, in Titusville, Florida. With a waiting list of 125, it would be
four to five years before someone on Medicaid could get a bed.
Facilities owned by Beverly Enterprises, the country's largest chain,
push the Medicare payment connection, distributing video tapes, brochures
and pamphlets telling families how they can mine the skilled-nursing benefit.
When CR's reporter went shopping for a nursing-home bed for her mother,
an admissions official at the Los Gatos Healthcare Center, in Los Gatos,
California, said it would be best to have a doctor admit her mother to
a hospital for three days "for observation and retraining," so
she could learn to inject insulin and thus qualify for the Medicare benefit.
The admissions official also recommended rehabilitation services, suggesting
that a doctor could order physical therapy to strengthen the woman's muscles.
"People get priority if they start in rehabilitation or subacute care,"
we were told.
WHEN MEDICARE STOPS
Eventually, Medicare stops paying. Either qualifications for benefits
are no longer met, or the 100 days run out. For many families, coverage
ends sooner than they expect. On average, beneficiaries use about 57 days
of skilled-nursing care in any calendar year. When benefits end, residents
may have to move. If you can't swing the private pay rate the facility
charges, or if the facility is not certified for Medicaid, the fallback
government program, you'll have to uproot your loved one.
Before you place your relative, make sure you know the facility's certification
status. About 11,000 facilities are certified for both Medicare and Medicaid,
but some 1,100 homes are certified only for Medicare. If your relative
needs continued nursing care, and Medicaid will at some point have to pay
the bills, choose a facility that's certified for both.
HOW MEDICAID PAYS
Medicaid is the health-insurance system for the poor, including people
made poor by nursing-home bills. It's the payer of last resort and the
largest financier of nursing homes, paying some $38 billion in 1993. Most
nursing homes couldn't operate without Medicaid money, but they nevertheless
give Medicaid patients low priority, since reimbursement rates in most
states are relatively low. "Homes try to avoid Medicaid as a source
of payment because others are far more lucrative," says Mike Connors,
program director for Citizens for Better Care, a Michigan advocacy group.
Medicaid is funded jointly by the federal and state governments. The
federal treasury contributes between 50% and 80% of every dollar spent
on Medicaid benefits, with the greatest share going to states with the
lowest per-capita incomes. States pay the rest. States also set the reimbursement
rates, which according to Federal law must be "reasonable and adequate
to meet the costs...incurred by efficiently and economically operated facilities."
How states fix those rates can also determine which facility will accept
your relative. In states where the reimbursement rate is the same for either
light- or heavy-care residents, a facility might prefer those who don't
require as much work, and place those needing heavy care at the bottom
of the list.
To qualify for Medicaid, a patient must meet an income and asset test.
The test varies from state to state. But in most states, if your income
is less than the private-pay rate, you can be eligible for Medicaid. Most
of your income each month (including Social Security payments, Supplemental
Security Income and pension benefits) goes directly to the nursing home.
Medicaid pays the difference between your income and the Medicaid rates.
(States allow each resident to keep a small monthly personal- needs allowance
of at least $30.) Before Medicaid will pay, all assets other than a home,
household furnishings, a car, a burial plot and burial fund, and $2,000,
must be spent on nursing care. Using up those assets is called a "spenddown."
Many nursing-home residents spend themselves into qualifying "poverty"
in less than 12 months.
Federal rules offer some protection for spouses who are still at home.
This year they can keep a minimum of $15,000 and a maximum of $75,000 in
assets. Those numbers change annually. States can increase the minimum
amount. Spouses who have no income of their own can keep between $1,254
and $1,871 a month (states are also free to raise the minimum). Some, seeing
the need for nursing- home care in the future and wishing to preserve something
for their children, use trusts and other financial devices to give what
they have to their children before the health-care system takes all.
Under federal law, estate transfers must usually be made at least 36
months (60 months in the case of trusts) before a person applies for Medicaid.
If they occur sooner, Medicaid may not pay for a certain period, and those
assets may go to the nursing home anyway. Transferring assets, while legal,
turns a program for the poor into a subsidy for the nonpoor.
MEDICAID ELIGIBILITY
Financial eligibility is the first hurdle to Medicaid coverage. Medical
requirements, which are set by federal law, are the second. States have
discretion to decide what disability qualifies a patient for a Medicaid-supported
nursing-home stay. The medical requirements vary by state. As a way to
thin the ranks of people eligible for benefits, some states are tightening
the medical criteria in ways that disqualify many people who suffer from
Alzheimer's disease and other kinds of dementia, but who are otherwise
in good physical condition.
Dorothy Parker, the ombudsman in Anne Arundel County Maryland, says
that some residents with dementia already living in nursing homes have
been asked to leave because they are no longer eligible for Medicaid under
new interpretations of the rules. Residents evicted from nursing homes
have few options, since they have already spent whatever assets they had
and have incomes too small to pay for alternative care. "You pray
something horrible is going to happen to these people so they can become
eligible," she says.
If a Medicaid patient must be transferred to a hospital, there may not
be a place open when he or she is ready to return. States determine the
length of time a nursing home has to hold a bed for a hospitalized Medicaid
resident. The number of days CR has seen ranges from none to 15. Some states
are trying to shorten these "bedhold" periods as another way
to reduce their Medicaid costs.
Sarah Burger, a public policy associate at the National
Citizens' Coalition for Nursing Home Reform, says that, as a way to move
out Medicaid residents in favor of more profitable patients, facilities
sometimes send them to a hospital or an acute psychiatric facility, claiming
the nursing home can't manage them. "When they return, there's no
bed available," Burger says. "This pattern happens over and over
again." The law does, however, require a nursing home to readmit the
resident to the next available bed.
PAYING PRIVATELY
It's no secret that nursing facilities prefer residents who are able
to pay with their own resources for at least some period of time. The admissions
director at the Hebrew Home of Greater Washington, for example, said that
if CR's reporter's mother could pay for a year she would have "high,
high priority." She explained that 70% of the home's residents were
on Medicaid, but that the facility couldn't operate if Medicaid had to
pay for every resident. People who can pay "subsidize" those
who don't, she added.
To gauge who can pay and who can't, the application process includes
the grueling task of filling out detailed financial statements. Financial
requirements to move to the head of the queue vary. St. John-Bon Secours,
located in Detroit, "suggests" that incoming residents have enough
assets ($45,000 to $50,000) to cover a one-year's stay. "If we have
a year of private pay, we can be certain things will work pretty well,"
an admissions official said. In other words, a bed will materialize.
If you pay for your relative's care and want to comparison-shop for
the lowest daily charges, be forewarned: It's not easy and perhaps impossible.
Many nursing facilities hesitated to give prices over the phone until we
provided specific details of our relative's condition. Some nursing homes
segment their rates according to the kind of care a person requires. For
example, The Hebrew Home for the Aged, in Riverdale, New York, charges
a daily rate of $223 for what it calls "residential health care,"
$268 for "enriched residential care," $314 for "skilled
nursing care," and $356 for "special care units."
Researchers at the Health Care Financing Administration, which supervises
the Medicare program, have identified 44 different types of care a facility
could provide. In the absence of standard terminology, it's impossible
to know, for example, whether one facility's enriched residential care
is similar to another's intermediate. Price isn't necessarily related to
quality. CR compared daily rates at 60 facilities in metropolitan centers
around the country, trying to compare price with the quality of care. There
was no relationship
LONG-TERM-CARE INSURANCE
Another way to pay for a nursing-home stay is with a long-term- care
policy, a relatively new form of insurance coverage. These policies pay
a daily benefit, usually between $50 and $200, that helps defray nursing-home
expenses. That benefit can be paid for as short a time as one year, or
it can last until the policyholder dies. Policies can begin paying as soon
as a person enters a nursing home or after a waiting period of 30, 60,
90 or even 100 days. The longer the waiting period, the lower the premium.
An inflation rider on long-term-care policies, which can double the
premium, increases the value of the benefit usually by 5% a year. Despite
its cost, the rider is essential. Otherwise, the insurance benefit may
be meaningless 20 or 30 years later when you may first have a need for
it.
Many policies also pay benefits for home care, an amount that usually
equals 100% of the nursing-home benefit if medical or skilled care is needed
and half of the benefit if nonskilled or personal-care services are required.
CR has rated long-term-care policies in the past and found them riddled
with significant loopholes and barriers to receiving benefits. State insurance
regulators, acting through the National Association of Insurance Commissioners,
have adopted model laws that require inflation protection as an option,
caps on rates, prohibitions on certain underwriting practices, and nonforfeiture
benefits, which return some value to policyholders who lapse their coverage.
Some states have adopted some of these model laws. Others have adopted
parts of them. And a few companies on their own have incorporated some
of the improvements.
There's still no uniformity in the quality of coverage across
states. Policy comparisons remain virtually impossible, and new, troublesome
issues are emerging. Some companies are refusing to pay benefits if care
is provided in assisted-living facilities, and regulators have yet to grapple
with the question of whether a policy purchased today will indeed pay benefits,
say, 20 years from now when new types and places of care will undoubtedly
have surfaced.
Premiums are high, perhaps unaffordable, for those who wait until they
are elderly to buy a policy. For a policy with an inflation rider that
compounds the benefit, Amex Life, a large seller of long-term-care policies,
charges $3,270 to a 75-year-old who buys a $100 daily benefit that lasts
for three years and starts after a 100-day waiting period. Amex Life charges
a 55-year-old $820, and a 65-year old $1,480.
Long-term-care insurance may be an option for people who can qualify
medically and who can afford the premiums before they become prohibitively
expensive. CR recommends buying the coverage at age 65 if you have significant
assets you want to protect, and if your budget can accommodate a premium
of around $1,500. Long- term-care insurance isn't suitable for people with
few assets who can expect Medicaid to cover a nursing-home stay, or for
elderly individuals who might have to sacrifice more pressing needs to
pay thousands each year in premiums.
People who have bought policies in the last 10 years or so should carefully
review them to see what types of nursing facilities are acceptable to insurers.
Many policies are quite restrictive, and companies won't pay benefits if
you go to the wrong type of nursing home. It's important for your family
to understand those limitations and consider them in the search for a suitable
nursing home should one become necessary.
Copyright Consumers Union of U.S., Inc., September 1995
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