Financing Health Care
For the Elderly
n Health care costs
continue to escalate
n Technology is keeping
people alive longer,
these advances raise
the cost of health care
n The number of elderly
n Most people use
toward the end of their
lives, which affects the
overall expenditures in
n As a society we tend
to believe that we
should try and save a
life at almost any cost
n The elder use a large
portion of our health care
dollars. Most of this
money is spent on long-
n This chapter focuses on
long-term care, Medicare
& Medicaid programs as
these are the programs
most used by the older
Financing Options ?
n Cost of extended long-term care is high.
n Cost of nursing home care for one resident
is between $3000 and $5000 a month.
n The cost can dwindle an individual’s life
savings in a matter of months.
n Even though we are seeing people are
healthier longer- elders may live in an
unhealthy state longer than in the past.
Funding Ratio – Long Term Care
n Public Sector n Private Sector =
Programs= 60% of 40% of long-
long-term care term care
– Medicare, – Insurance
Medicaid, VA vendors, and
Administration, and individual
state programs savings
Proper Legal Authority
and Long-Term Care
n Does the individual
require care? If so, do
family members have
access to funds to pay
for the care?
n Is the elderly person
incompetent? If so,
who makes the
decisions on their
n Usually a surviving spouse or child assumes the
the primary role as guardian.
n When families are close in proximity they share
responsibilities. 20% of Americans change
residences each year, which can create
disagreements among siblings concerning the care
of their parent.
When there is not consensus among family
members, the disagreement could turn costly in
Probate courts are state courts
n If preplanning has not been done, protection of the
individual must go through the probate court
n Probate courts are set up to deal with issues such
as wills, trusts, probates
n Guardianship = the care of the person’s self under
the probate court
n Conservatorship = protection of a person’s money
n Financial power of attorney = document
regarding financial decision making.
n Financial power of attorney must be notarized and
n Fiduciary = a person legally bound to put the
interests of the person for whom he/she is acting
ahead of his/her own in making decisions
n Advance directives or
medical power of attorney
= individual appointed to
make medical decisions
for a person who is no
longer able to
n Also provides the
authority to place the
individual into different
(hospital, nursing home,
n Generally known as living
n Health care professionals
need to be aware of this
for DNR orders.
n A living will can exist
without a medical power
n Important :A living will is
a statement of intent only.
n Expresses the individual’s desire that he/she not
be kept alive solely by artificial or extraordinary
n “IS” intended to be the primary instructions
directing the person’s attending physician.
n The living will alone is usually not sufficient to
direct the termination of life support or for
insurance of a do not resuscitate order.
n Financing Health Care
Public Sector Financing: 60%
n The majority of long-term care expenses for
elders are funded through the public sector.
n Three primary federal programs:
– Medicare, Medicaid, Veterans Administration
– The state contributes about 30-50% of costs
under the Medicaid program.
n Enacted in 1966
n Is a federal health insurance program,
usually for persons 65 years of age and
n Medicare provides two plans:
– Part A: hospital coverage
– Part B: supplement; primarily for physician
visits and outpatient care
Medicare and long-term care
n Very limited benefits:
– will pay up to 100 days in a skilled nursing
facility, but must be hospitalized 3 days prior to
the 100 days
– full cost for the first 20 days
– days 21-100, the patient must pay a co-payment
– in 1997 this amount was $95.00 a day
When do Medicare benefits stop?
n When the person reaches a
point where the extended
medical services are no
longer helping their
n Medicare will only pay if
requirements are met,and
if the patient is making
progress to measurable
goals: If the patient status
changes from skilled care
to custodial care-
Medicare no longer pays
n For most individuals, the
need for care still exits.
n Most elderly believe that
Medicare will pay for their
long-term care, or that
Part B will kick in. Part B
supplements the basic
plan, but does not extend
Initially enacted in 1969 as part of President
Johnson’s “War on Poverty”.
Medicaid program pays health care costs for
individuals with low incomes and limited assets.
Pays the largest portion of ongoing long-term
Nursing home residents qualifying for Medicaid is
n In the 1970”s the program was extended to
include nursing home cost coverage for the
poor, (primarily elderly people).
n In the 1980’s legislation expanded the long-
term Medicaid coverage from poor elderly
individuals to include middle-class elders
with limited assets.
n This is the reason that the majority of
Medicaid moneys is spent on long-term care
for the elderly.
n The original Medicaid rules for eligibility
for long-term care coverage allowed an
individual to retain only $2000.00 in assets.
n A couple together was allowed to retain
n Then legislation created the concept of
community spouse resource allowance
(CSRA). Non-institutionalized spouse was
allowed enough assets to continue to
conduct his/her life independently.
n In 1997 that amount was $79,020.00
(think of difference from $3,000.00)
Is a combination of federal and state law.
n There are two primary criteria for eligibility for
long-term care benefits:
– medical eligibility and financial need.
n Medical eligibility = determined by physician
n Financial need = specific rules regarding exempt
assets (may vary from state to state).
Several assets are exempt for
n Homestead & Personal
n Prepaid funeral &
n The value of a vehicle
n Liquid assets of $2000
for a single person or
$79,020 for a couple.
n The state pays a small part
of long-term services.
n Many states are
developing programs to
assist elderly individuals
in remaining in their
homes and communities.
n Keeping a frail, but
competent person in their
home is far less expensive
than institutionalizing or
them in a nursing home.
Veterans Administration Benefits
n Veterans’ benefits are federal entitlement benefits
by the Federal Department of Veterans Affairs.
n Requirements for benefits = active duty service in
the armed forces with no dishonorable discharge.
n Benefits may include: hospital, nursing home,
home health care, outpatient treatment, home
health services and community residential care.
n To qualify: must have a service-connected
condition, a non-service-connected
disability with the inability to pay for care,
or a disability that incurred or aggravated in
the line of duty and led to discharge from
the armed forces.
Private Sector Funding: 40%
n There are two primary sources:
– individual payments (one third of all expenses)
– long-term care insurance (5% of all expenses)
– One of the initial choices individuals and
families are faced with is whether or not to set
up a formal or informal plan. In many states
there are geriatric care managers available for
consultation regarding the various aspects of
Sources of Funds
n Assets accumulated by the individual:
savings acct, checking acct, certificates of
deposit, credit unions, mutual funds, money
market acct, insurance policies, annuity
contract, retirement acct, IRA’s.
n It is advisable to ask the individual whether
or not anyone owes them money, review
their real estate and personal property(to
Long-Term Care Insurance
n A product that pays for long-term care
expenses when benefits under Medicare and
Medicaid are terminated.
n Benefits : it’s portable from state to state,
allows care while preserving a portion of
their assets, provides time for the individual
to receive needed services while taking the
time to make appropriate arrangements.
Long-term care insurance will pay
benefits for 2,3,5 yrs or lifetime-
n Policies are designed
to pay a certain daily
benefit. Usually that
figure should be
pegged to the average
cost of nursing home
care in the individual’s
Cost Containment – How?
– For the next century
n national health care
benefit plan for all
n continuing with
n rationing health care
based on need, age, or
other defining factors
n furthering the idea of
n Rationing of health care
may be argued due to the
fact that the elderly are a
homogeneous group by
almost all standards
except chronological age.
n Health promotion will
provide the best chance
for improving health while
keeping costs manageable,
if made an essential way
of life rather than just a
n Medicare, Medicaid, and
n Long-term care is the
largest single expenditure,
primarily for the elderly.
n Preplanning can avoid
costs and disagreements.
n We can now see how
important it is for our
country to make rational
decisions about the use of
health care dollars.
n If the elderly are
involved in these
difficult choices, they
can ensure fairness &
dignity for themselves
& for future