The Financial Impossibility for Nursing Homes

time-is-moneyIn last week’s entry I wrote about new nursing home daily rates, and the possibility of MassHealth (Medicaid) to help cover the very expensive cost of care.  This week I’ll shine the spotlight on the very real challenge for nursing homes, namely the delay between a resident running out of money and being Medicaid-eligible, and when that first check actually reaches the nursing home. It can be a year before they get paid!

Let me give you a typical, albeit simplified example. Suppose Mom moves into a nursing home on February 1, 2016 and meets all the criteria for financial eligibility on that date. So long as her application reaches the Department of Medicaid by May 31, 2016, once approved, her benefits will be retroactive to the day she moved in. Meanwhile, she has no funds with which to pay the nursing home, so she’s probably only paying that portion of her income that Medicaid will require. Let’s assume that’s $1,500 per month.

To calculate this amount for yourself, it’s somewhat easily done. Take your total monthly income of social security, pensions, and such. Don’t add in monthly withdrawals from your retirement accounts; remember you wouldn’t have those anymore as they would have to be cashed in and/or spent. From this total income subtract your Medicare premium, your part D prescription drug plan premium – and you’ll be getting one as part of being in a nursing home if you don’t have one already – and also subtract the premium for any other health or dental insurance you have.  From what’s left, you get to keep a whopping $72.80 per month and the rest is what you pay to the nursing home each month. This is the Medicaid Patient Pay Amount.

Now, back to our example…. A few weeks after the Department receives that application they will issue a request for additional information. That will grant another month for a response. So now we’re somewhere in mid- to late-July.

calendarAfter responding to the Information Request, another couple of months will pass, and the Department will issue a Denial Letter for failure to respond to the request. It won’t matter that every shred of paper requested was provided. They will issue a Denial. It’s how the Department meets its time deadlines in an atmosphere of being inundated with paperwork, and not nearly enough time or manpower to properly evaluate it all.

We’re now sometime in September, hopefully. Mom then has 30 days within which to appeal the Denial to the Board of Fair Hearings (an internal department within the Department of Medicaid – yes, they hear and rule on appeals of their own Denials.)

Let’s assume Mom’s attorney is conscientious, like a certain law firm you know and love, and files the appeal immediately. The Board will need another month or two to set a hearing date, usually only a week to 10 days after you get the notice. Yes, after all that you get less than two weeks’ notice of your appeal, and extensions are only granted in extreme circumstances and usually only if you can provide proof of a scheduling conflict. (I had to provide a letter from my father’s doctor to prove he was hospitalized in the ICU in order to have a hearing rescheduled.)

Where does that leave us? The appeal hearing is probably scheduled for sometime in late-November or early-December. In this situation, there’s no real controversy or issue, the caseworker only issued the denial because there wasn’t enough time to fully evaluate the application. In cases like that, the caseworker will almost always get it all sorted out on the eve of the appeal.

If it’s resolved without the need to actually hold the appeal, the final approval will usually arrive within another month. (If there is an actual issue and the hearing goes forward, you can expect another 2-5 months for an appeal decision.) That’s 11 months to apply for, process and get approved for nursing home Medicaid… in a simple situation!

And we didn’t even get to the time it takes after that for the nursing home to finally receive payment on it’s claim. That’s just the time until they can file a claim. All the while, they are required to accept the Medicaid Patient Pay Amount from the resident as full payment while the application is pending.

financeHow does this translate, financially, to the nursing home? Their private pay rate is $405 per day or an average of $12,318/mo. The Medicaid rate for that same bed, at best is $8,625/mo. But Mom is only paying $1,500. That’s a shortfall of $7,125 per month for a total of $78,375 owed by the time they can finally submit a claim! That’s a huge blip on the cash flow radar for any business. Assume they have 5 people at any given time in the same situation and you can see the impossibility they are faced with managing.

While the nursing homes are in a difficult situation, so are families.  They often mistakenly believe they are required to spend all assets before even contemplating a Medicaid application. No so! You can significantly help the nursing home by talking with your attorney early on to understand the process, and make a plan for the application.

In most cases, it makes sense to set aside some funds to help cover the things Medicaid won’t pay for, like clothing, subscriptions, glasses, hearing aids, some specialized medical equipment. This is permitted by Medicaid regulations, and gives the family a pot of money to use for Mom without having to dip into their own pockets to cover such expenses.  And let’s face if, you’re not going to let Mom go without the things she needs.

If you or a loved one are seeing nursing home care on the horizon, request a complimentary Good Guardian Strategy Session or over there to the right of this article. It’s a no-pressure, 30-45 minute phone call to help you determine your best next step. Easy peasy.

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