EDITOR'S NOTE: A version of this article was originally published in the December 2012 issue of Kiplinger's Retirement Report. To subscribe, click here. (opens in new tab)
One in eight individuals 65 and older suffers from Alzheimer's disease -- quite a sobering statistic for the growing number of baby boomers crossing that age threshold. And the costs can be an "overwhelming financial burden," says Carol Steinberg, executive vice-president of the Alzheimer's Foundation of America.
Private and government insurance programs may cover some costs. Here's a primer on your options.
Many people are shocked to discover that Medicare does not cover the long-term custodial care that Alzheimer's patients need. Custodial care is the non-medical care associated with activities of daily living, such as bathing and dressing.
Medicare does cover limited care in a nursing facility or at home. For home care, the patient must require skilled-nursing care or physical or occupational therapy to help with the recovery from an illness or injury -- not to help an Alzheimer's patient with daily-living activities. "One of the most difficult situations is when a loved one needs personal or custodial home care, but Medicare will only cover that if there is some type of skilled-care need," says Frederic Riccardi, director of programs and outreach for the Medicare Rights Center, an advocacy group.
At-home services in most cases can be provided for fewer than seven days each week or less than eight hours each day over a period of 21 days or less. Limited custodial care could be provided during these visits -- perhaps if an Alzheimer's patient treated by a registered nurse for a broken hip needs help bathing. Medicare pays the cost of a skilled-nursing facility, but only to provide continuing treatment following a hospital stay of at least three days. Skilled care in a facility is limited to 100 days.
While Medicare offers little by way of custodial care, it does provide diagnostic and medical treatment that Alzheimer's patients need. The new annual wellness physical exam, which is free and part of the health care law, includes testing for cognitive impairment. "This is a critical, yet hardly known, provision," Steinberg says. Medicare also covers visits to a geriatric assessment clinic.
Alzheimer's patients and their families need to carefully choose a Medicare Part D prescription-drug plan or private Medicare Advantage plan. Alzheimer's medications are generally covered under Part D, but plans vary regarding co-payments. Use the Medicare Plan Finder (opens in new tab) to compare the total costs of your drugs under each policy. The Alzheimer's Association offers a guide about coverage (opens in new tab) for common Alzheimer's drugs.
If you choose an Advantage plan, make sure your neurologist and other physicians you see often are covered as in-network providers. Otherwise, you will pay higher out-of-pocket costs. You can compare Advantage plans by using the Plan Finder.
These policies provide coverage for the custodial care that Alzheimer's patients usually need. Benefits typically kick in if the patient needs help with at least two activities of daily living or if a doctor provides evidence of cognitive impairment. Because most people with Alzheimer's receive care in their own homes, look carefully at the policy's home-care requirements. Typically, a patient must wait 60 or 90 days before benefits begin. But policies differ on when the clock starts ticking, which could be a big headache for caregivers.
For example, some policies start the 60-day waiting period on the day the doctor certifies the cognitive impairment -- and benefits kick in 60 days later. But other policies count only the days a patient receives care from a qualified caregiver during the waiting period. If the caregiver visits two days a week, the policy only counts those two visits toward the 60-day waiting period -- and benefits won't kick in for 30 weeks. In the meantime, the family has to pick up the tab for the caregiver.
Before you hire a caregiver, check the policy's fine print on the type of caregiver the company will cover. Some policies pay for any caregiver who is not a family member, while others only pay for licensed caregivers who work for an agency. Some families who hire an unlicensed caregiver later discover that the caregiver doesn't qualify under the policy.
Don't expect a policy to pick up round-the-clock home care. Daily coverage is based on the daily benefit. A policy with a $200 daily benefit, for example, will likely cover the cost of eight to ten hours of a home health aide. If a family caregiver can't fill in the gap, a nursing home may be a better option.
You can't use more than your daily benefit in a day, but you can stretch your daily benefit over longer periods. Say you choose a benefit period of three years, at $200 a day. If you only use $100 a day, your coverage can last for six years. Some policies cover adult day care, which can cost a lot less than daily caregivers. "Many adult day services specialize in care for those with Alzheimer's disease and similar disorders," says Kathy O'Brien, senior gerontologist with the MetLife Mature Market Institute.
This program, whose costs are shared by federal and state governments, is the primary payer of long-term-care services for the elderly. Unlike Medicare, it provides custodial care for Alzheimer's patients. Custodial care typically is provided in Medicaid-eligible nursing homes, but many states' Medicaid programs now pay for home care and sometimes adult day care or care in assisted-living facilities, says O'Brien.
The downside: You need to be virtually impoverished to qualify. Many people end up qualifying after spending their retirement savings on care. While state laws differ, generally you can't have more than $2,000 in countable assets, including investments. A spouse who lives at home can generally keep about $113,000. You're allowed to keep your home, car and assets in certain kinds of trusts. (Visit www.medicaid.gov (opens in new tab) to find eligibility requirements in your state.)
To protect more of your assets, you can buy a state-approved long-term-care policy that is "partnership" eligible. The policy would allow you to qualify for Medicaid without having to spend almost all of your money first. For example, if you buy a partnership policy that covers $200,000 of care, you would pay out of pocket until you have $200,000 left and still qualify for Medicaid. Go to the National Clearinghouse for Long Term Care Information (opens in new tab) to see if your state allows these policies.
Individuals who develop Alzheimer's while they're still working may be eligible for some coverage from disability insurance, either through an employer or an individual policy. "Their cognitive impairment can quickly reach a point where they can no longer maintain gainful employment," says Beth Kallmyer, a vice-president of the Alzheimer's Association. Most policies tend to end benefits at age 65, but rules vary by policy so it's worth checking.
The benefits triggers will depend on the policy's definition of disability. Some policies will make a partial payout if a newly diagnosed worker needs to cut back to part-time and will pay more if the worker needs to leave the job, says Barry Lundquist, president of the Council for Disability Awareness.
Individuals with early-onset Alzheimer's could qualify for Social Security disability benefits if they can't work. Early-onset Alzheimer's disease is on the government's "compassionate allowance" list of conditions subject to fast-track benefits approval. When you reach full Social Security retirement age, your disability benefits will convert to retirement benefits. (For more details, go to www.socialsecurity.gov/disability (opens in new tab).)
Other sources of help
If you have a life insurance policy, you may qualify to withdraw most of the death benefit while you're still alive if your doctor certifies that you have less than two years to live. The accelerated death benefit could help pay for care.
Some veterans may be eligible for help from the U.S. Department of Veterans Affairs. The VA may provide custodial care at home, in adult day-care centers and in VA nursing homes for veterans who pass strict eligibility tests (opens in new tab). Disabled lower-income vets may be eligible for Aid and Attendance benefits of up to $20,448 for an individual or $24,440 for married veterans. To qualify, a veteran must have wartime service and be unable to perform personal functions, such as bathing and dressing.
To find more government programs to help pay for care, go to www.benefitscheckup.org (opens in new tab), a free service of the National Council on Aging. Also visit the Alzheimer’s Association’s community resource finder (opens in new tab).
Haven’t yet filed for Social Security? Create a personalized strategy to maximize your lifetime income from Social Security. Order Kiplinger’s Social Security Solutions (opens in new tab) today.
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
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