Chapter 6

LONG-TERM CARE

Some older persons have very limited incomes and assets and are eligible to participate in a number of benefit and assistance programs. Others have adequate assets to cover their regular living expenses, but they cannot pay for long-term care for an extended period of time.

Programs for Older Persons with Limited Incomes and Assets:

Meals and In-home Services

If the person for whom you are caring has limited income and resources, there are programs that may be able to help. You may want to find out about the Food Stamp program which provides opportunities to purchase food. Your older relative or friend may be able to participate in a group or home-delivered meals program, and they may be able to receive supportive in-home services through your local Area Agency on Aging.

Benefit Programs

In addition to Social Security, the Supplemental Security Income program provides benefits to persons with limited incomes and assets who are blind, disabled, or 65 or older. To find out about these programs, contact your local Area Agency on Aging or the Kansas Department of Social and Rehabilitation Services. If your older relative served in the armed forces during wartime or has a service-connected disability, you should inquire about veterans benefits and services.

Housing Programs

There are housing programs for older persons with limited incomes who do not own their own homes. These programs include public housing and Section 8 rental certificates that may be available to low-income persons regardless of age.

Health Benefits

You may want to check with the Kansas Department of Social & Rehabilitation Services regarding programs, such as the Qualified Medicare Beneficiary (QMB) program, that assist low-income Medicare beneficiaries. This program helps low-income seniors with the premium and deductibles associated with Medicare. In addition, the Medicaid program may cover some of the medical expenses not covered by Medicare, such as prescription medications, and, in some cases, long-term home health and in-home personal care.

You also may want to explore the possibility of purchasing medigap insurance. Medigap insurance is private insurance which can cover health care not covered by Medicare as well as Medicare deductibles.

Long -term care insurance can pay a set amount or a percentage of costs for long-term care both at home and in long-term care facilities. However, long-term care insurance may:

• Be quite expensive for persons aged 70 or older.
• Be unavailable to persons of advanced ages.
• Not pay in the case of pre-existing conditions.

Tax Deductions and Credits

Out-of-pocket expenses associated with long-term care, including custodial care, long-term care insurance premiums, prescription and nonprescription drugs, and items such as incontinent supplies, are tax-deductible as medical expenses. The expenses must be for the care of a chronically ill individual who needs help with at least two Activities of Daily Living or requires "substantial supervision to protect against threats to health and safety due to severe cognitive impairment." Tax credits generally benefit low-income taxpayers, and they usually require the caregiver to live with the care recipient and to be employed outside the home.

Information about income tax deductions and credits is available in the U.S. Senate Special Committee on Aging's informational document "Protecting Older Americans Against Overpayment of Income Taxes."

Covering Long-Term Care Costs

Many caregivers and care receivers may not qualify for public-funded assistance. They may have substantial income and assets, but do not possess the financial resources to pay for needed services for extended periods of time without impoverishing themselves. In caregiving, many families deplete the resources they accumulated over a lifetime. If this happens, caregivers may try to provide all of the needed care. This can be difficult for spouses who are frail or have medical problems, as well as for family members who work and/or have children. In these instances, you and your older relative should consider asking other family members to contribute to the cost of care and/or to provide some of the care on a regular basis.
If formal part-time care and informal help from families is insufficient, the older person can enter a skilled nursing or other long-term care facility that is certified to accept Medicaid patients.

Ways to Maximize Your Assets

Most caregivers need to budget wisely and maximize their relative's assets. There are several ways to do this:

• If your older relative wants to remain at home, they could live on one floor and rent out rooms in the rest of the house through a house- sharing arrangement. This arrangement can bring in a substantial amount of income where housing is relatively expensive or in short supply.
• Rent out the residence and have your older relative move to a smaller home, an apartment, your residence, or other housing option. Renting out a residence and house-sharing both provide income that will usually keep pace with inflation, and they can offer tax advantages. Improvements, repairs, and all or part of the house can be depreciated. If your older relative lives in the house, they can claim some of the utilities as a tax exemption.
• If the house is in an unsafe area, or in a neighborhood or community that is declining in value, it may be best to sell. A federal tax exemption of up to $250,000 is available for a person 55 or older who sells his or her home, or $500,000 for a couple. Another possibility is to provide room and board to someone in exchange for caregiving and/or other needed services. There are several drawbacks to this arrangement, however.

It may be difficult to:

• Prove to the IRS that your older family member has received home health services in exchange for room and board.
• Depreciate the room for tax purposes.
• Ensure that the home care employee honors his or her part of the arrangement-providing services in exchange for room and board.

A preferable arrangement is to rent out the room(s) and pay a home care worker. Some home care employees prefer to work as independent contractors. This arrangement frees you from dealing with social security, workers compensation, and from withholding taxes-all of which can be complex and time-consuming. In this case, the contractor is responsible for paying social security and other taxes. There are rules that must be followed for a person to be a contractor rather than an employee. Thus, be sure to consult an income tax preparer, lawyer, or financial planner before considering this arrangement.

Contact your insurance company to be sure you are covered against possible liability should property be stolen, damaged, or destroyed, or if a renter or home care employee suffers injury. If you pay the home care worker as an employee, there are companies, listed in the yellow pages under payroll preparation services, that issue salary checks and arrange for withholdings for a fairly nominal fee.

Reverse Equity Mortgages are another option if an older person wants to remain at home and receive monthly payments from a lending institution. However, the upfront costs for negotiating this type of loan can be considerable. Before making a decision, talk to your lawyer and, if possible, a home equity conversion counselor. Contact your local bank for more information.

Sale-lease back arrangements allow older people to sell their homes and remain as life-time tenants. However, this arrangement is legally complex, can impact on an older person's eligibility for Medicaid and similar benefits, and precludes benefiting from any future gains in the value of the property. Other ways to save money include:

• Checking to see if there is property tax relief for older home owners and what the eligibility requirements are.
• Joining clubs or organizations that offer group supplemental health and car insurance plans and discounts on other items and services. Buying at discount and thrift stores during sales and with coupons.
• Checking with mass transit and taxi companies about senior discounts, non- peak hour ride discounts, and free ride services for persons with low-incomes.
• Asking plumbers, trash pick-up services, restaurants, etc. if they offer discounts to older customers-many do, but sometimes only if you ask.

You may be able to save 10 to 75 percent on some items and services if you follow these suggestions.

Lastly and probably most importantly, if you are helping with expenses, be sure your relative's assets and your assets are carefully reviewed. Are you getting the best return on your investments without risking your principle? Are you aware of all of your older relatives' bank accounts, stocks, bonds or other assets? What about pension plans? Some older persons are not getting the money to which they are entitled from pension plans they contributed to years ago.

Having reviewed your assets, what changes can you make to bring in more income?