Easing the cost-of-living burden

Max Schaffer is quick to tell you that he served in the U.S. Army Air Force during World War II for exactly 4 years, 8 months, and 11 days. His penchant for details and accounting served him well in wartime and throughout his career as a successful businessman. When Schaffer moved into Belmont Village of Burbank, California, in 2008 at the age of 90, he had a clear plan and sufficient income and savings to pay for his rent and care. Then, two years ago, the financial markets collapsed and the ensuing recession changed everything for him and for most elder Americans struggling to afford the costs of senior housing and long-term care.

In the main, seniors pay for senior living through a combination of fixed income, savings, and home equity. Fixed income covers a fraction of the annual cost of an assisted living apartment, according to a research collaboration published in the 2009 Overview of Assisted Living by the American Seniors Housing Association and the National Investment Center for the Seniors Housing & Care Industry. The research also shows that families contribute significantly to the cost of housing and care of a loved one, from 7%-15% depending on care services. The effects of the recession-plunging home values, lower stock prices, miniscule CD rates, lingering unemployment-have reduced the income and financial statements for both seniors and families.

Responding to these circumstances, long-term care providers have identified several sources of financial support for current and prospective residents. Building awareness of Veterans Administration (VA) benefits among resident veterans like Schaffer is one way that providers can help residents augment their income. A senior living line of credit and funding from the sale of a life insurance policy are two ways to help make funds available quickly when a resident’s needs can’t wait. To help reduce the costs of rent and care, many providers offer shared apartments. Depending on individual circumstances, seniors and families may benefit from certain tax benefits afforded to them by the IRS. In all, these solutions can have a big impact in the calculus of making ends meet. Providers are a factor in the equation, providing education and awareness in an integrated financial solutions package.

“The Aid and Attendance benefit is a small part of a much larger VA pension plan. Not many veterans know about it.”

Belmont Village Senior Living, which owns and operates 19 assisted and independent living communities in six states, has implemented the above-mentioned financial solutions with success. Here is a rundown of how each solution has contributed to a more financially sound resident population.

Veteran benefits

For Schaffer, the Aid and Attendance benefit program of the U.S. Department of Veterans Affairs has been a godsend. “I wouldn’t have applied without the recession. Now I need it,” he says. The benefit is for veterans whose disability or death was not caused by military service, and it may be utilized in assisted and independent living.

Schaffer learned about the benefit during an educational presentation at his community. He admits that the application is arduous, requiring extensive documentation about military service, medical history, and his current finances. His lifelong business skills helped him to complete the application on his own and he now receives $1,644 a month.

Spouses of veterans are also eligible for VA benefits. Judi Gordon of Mason, Illinois, secured a VA Aid and Attendance benefit for her mother, June Felice, a Belmont Village assisted living resident in Carol Stream, Illinois. Felice’s husband, John, now deceased, served in the U.S. Navy during World War II. Gordon learned about the benefit from an insert in her monthly statement. The application process took two months, Gordon says, and the benefits are retroactive from the initial time of application.

Tom Pizur of the Pizur Financial Group in the greater Chicago area assists veterans in the applications process through Veteran’s Friend, a non-profit organization associated with his financial services company. “The Aid and Attendance benefit is a small part of a much larger VA pension plan. Not many veterans know about it,” he says. He cautions providers not to directly represent veterans in making the application or indirectly by facilitating third parties who provide assistance for a fee. Charging a representation fee is against VA regulations, he says. The VA Web site advises veterans to seek application support from any of the 87 VA-recognized representatives, which can be found by searching for “Recognized Veterans Service Organizations” at www.va.gov. County or regional VA offices can also be helpful, Pizur adds.

To honor its resident veterans and promote the federal Aid and Attendance benefit, Belmont Village commissioned Los Angeles photographer Thomas Sanders to create photographic portraits of its veteran residents, which are now part of permanent exhibitions in many Belmont communities. The images and stories of these veterans are featured in a new book, The Last Good War: The Faces and Voices of World War II, published by Welcome Books, New York, available in bookstores.

Senior living line of credit

“We tried home care but it was complicated and expensive, and I felt that mother was still not safe,” she says, adding, “Living with me was not a good solution for either of us.”

Her mother’s home equity would be sufficient to pay for the costs of living in a community, but selling her home would take time and her mother’s needs would not wait. Following a visit to Belmont Village of Rancho Palos Verdes, California, she applied for the senior living line of credit and received funds in three days. Layman was able to move her mother immediately and had the time to properly prepare her home for sale.

Elias Papasavvas, Elderlife’s founder and CEO, has designed his company to address the unique circumstances of the senior living customer. “There is not a conventional banking product to accommodate a family in crisis in a vulnerable situation with a rapid turnaround by counselors who understand both senior care and banking,” he explains. The company provides interest-only loans with no collateral requirements in amounts up to $50,000 and usually funds within 48 hours. Funds are sent directly to providers each month.

Life settlement

Traditional life insurance policies are typically purchased early in life to provide funds in case of death: to settle debts, cover final expenses, or provide income replacement for family members. The monthly premiums can be a burden for a senior policyholder with care costs and the original, intended benefit may be less important late in life.

The so-called life settlement provides access to cash through the liquidation of an existing life insurance policy. One life settlement company, Life Care Funding Group, provides funding solutions for seniors by paying a one-time cash distribution greater than the cash value that the policyholder would ordinarily receive if the policy was terminated by the owner. The company effectively purchases the financial benefit of policy and takes over the premium payments for the remainder of the seller’s life. Funds pay directly to the provider and are available within 30-60 days, according to the company.

Companion apartments

Although shared apartments are common in the industry, their availability is more important now as residents and families seek ways to lower the costs of senior living. Savings can be substantial, as much as 35% at Belmont Village, and each resident gets the full benefit of all community services. Providers must work with their existing floor plans to designate which apartments are appropriate for two residents, and not all floor plan configurations are suitable for this purpose. In addition to cost savings, there are the social benefits of companionship and an added sense of security for both residents and families.

Tax benefits

The IRS allows certain healthcare costs associated with living in a long-term care facility to be tax-deductible expenses. Furthermore, any individual can contribute financially to the cost of senior living through a direct gift, up to $13,000 per donor per year, without any tax liability for the donor or recipient. Providers are advised to direct residents and families to a professional tax consultant regarding all income tax provisions.

Administrative support

Long-term care insurance claim support can be an important point of differentiation for providers who offer it. Working with insurance companies to verify care, coordinate billing, and meet the various carrier requirements are invaluable services for residents and families.

Facilitating financial solutions is an important element of the service offerings of any company in our industry and in any economic climate. In addition to the potential to enhance occupancy rates, a well-considered and fully implemented plan can lead to happier, healthier, financially confident residents. Everyone wins.

Jeff DeBevec is Vice President of Communications for Belmont Village Senior Living and is a member of the Public Relations Task Force of the American Seniors Housing Association. Long-Term Living 2010 November;59(11):26-29

I Advance Senior Care

I Advance Senior Care is the industry-leading source for practical, in-depth, business-building, and resident care information for owners, executives, administrators, and directors of nursing at assisted living communities, skilled nursing facilities, post-acute facilities, and continuing care retirement communities. The I Advance Senior Care editorial team and industry experts provide market analysis, strategic direction, policy commentary, clinical best-practices, business management, and technology breakthroughs.

I Advance Senior Care is part of the Institute for the Advancement of Senior Care and published by Plain-English Health Care.