James Sullivan

Help Your Clients Plan for the Cost of a Stay in a Long-Term-Care Facility

The costs of a long term care facility stay may contain unpleasant surprises.

February 14, 2011
by James Sullivan, CPA, PFS

Families searching for a nursing home must make several important financial decisions under stressful conditions. Most families in this situation have little knowledge of or experience with, nursing homes. They often do not know which questions to ask. In addition, their focus is typically short term, not going much beyond the family member’s immediate-care needs. The client and his or her family will need the CPA’s expertise to help them focus on both the short-term and long-term financial implications of the need for care. To assist with this process, CPAs need to understand the different types of care available and the actual costs associated with them.

The CPA’s Role

A stay in a skilled nursing facility can be due to a number of health problems such as a stroke, Alzheimer’s disease, arthritis, cancer or a fall. The length of stay can vary from a few days to several years. For example, Alzheimer’s disease patients live an average of four years to six years after the initial diagnosis. It is not, however, unusual for the patient to live much longer. The client and his or her family will rely on the CPA to help them contend with two critical issues when planning for care — limited resources and uncertainty as to the type and cost of care that will be needed as the disease progresses. Affordability and the quality of care available inevitably come into conflict.

A CPA can assist clients with preserving their limited financial resources by making sure there is coordination of payments among health insurance plans. It is not unusual for several different plans to cover a skilled nursing-facility resident. For example, Medicare, a Medicare Supplement policy, a private employer’s health insurance plan and a long-term-care insurance policy can cover a patient. By coordinating proper payment among the policies, the CPA can help ensure that the family does not end up making an unnecessary out-of-pocket payment.

The CPA can create or revise long-term financial plans that include the cost of care under different assumptions. The assistance of a Geriatric Care Manager (GCM) or other knowledgeable healthcare professional may be helpful in preparing projections and discussing care alternatives with the client and his or her family. One of the most significant costs is that of a skilled nursing facility. But calculating the actual cost of living in such a facility is no simple task.  

Careful Planning Is Essential

For the CPA’s wealthiest clients the cost of care is important but secondary to finding a facility that offers the best care. The bulk of the typical CPA’s clients may have substantial, but not unlimited, funds with which to pay a nursing home. Some clients may have long-term-care insurance. A long-term-care insurance policy, however, will not cover all costs associated with a nursing home stay. Most policies provide only a limited pool of money to pay for care. Prudent planning and careful purchase decisions are necessary to stretch available dollars.

For the vast majority of clients, careful financial planning prior to nursing-home placement is crucial. They must understand the financial obligation they are undertaking and rearrange their financial plans to make the monthly payments.

According to Luise Warren, a GCM located in Chicago, families often underestimate the total monthly costs of a nursing home stay. Families find out too late that the nursing home’s monthly fees are not actually covered. In addition, they discover that the nursing-home resident often needs unexpected services. These services are provided but often at an additional cost. While Medicare may cover some of these, many are not. A CPA experienced in working with such families can help them anticipate and budget for these costs.

Cost Surveys Don’t Tell the Whole Story

Several large long-term-care insurance carriers publish periodic surveys on the annual cost of a nursing-home stay. For example, the Genworth 2010 Cost of Care Survey said the median monthly rate in the United States for a semiprivate room is $5,627. If the resident is in the Alzheimer’s unit of the nursing home, the cost is higher.

What does the nursing home’s regular monthly fee cover? The surveys offer only a general description. Genworth states that the charge “usually includes services beyond rent such as three meals a day, laundry, sundries, basic nurse supervision and generic, nonprescription pharmaceuticals.”

While these surveys and the service descriptions are helpful and a good starting point for families, they fail to take into account all the monthly nursing-home costs, according to Warren. Families and their advisers must shop carefully and understand which costs are included in the basic monthly fee and which are not. For example, if a resident needs to be brought down to the dining room by a nurse’s aid, the facility may charge an additional $5 to $10 per meal. For three meals, that adds up to an extra $15 to $30 per day or $450 to $900 per month.

Planning for the costs of care requires the CPA to understand what is included in the monthly fee and what is excluded. Brian Gordon, president of MAGA Ltd., has sold long-term-care insurance for more than 20 years. He agrees that the insurance company surveys fail to take into account all the costs of care.

“I’ll give you a simple example. Many facilities base their monthly fee on the assumption that only one caregiver will be needed to move the resident from their bed to their wheelchair,” Gordon said. “If it turns out the patient is too heavy or too frail for one caregiver to safely move, a second caregiver will have to be used. This results in an added daily cost that can add significantly to the monthly bill.”

Below are examples of goods or services that may or may not be included in the monthly fee (Medicare may cover some):

  • Escorting the patient to meals or other activities.
  • Need for more than one caregiver.
  • Isolation necessary due to illness.
  • Assistance with feeding.
  • Professional therapy (physical, occupational and/or speech).
  • A specialty wheelchair.
  • Medical or nursing supplies.
  • Added fees if the resident takes more than a certain number of medications.
  • Incontinence supplies.
  • Personal products.
  • Transportation for a doctor-office visit or for medical tests conducted offsite.
  • Use of oxygen equipment.
  • Telephone.
  • Cable television.
  • Beauty-shop visit.

Finally, the nursing facility’s pharmacy may not be on the list of approved providers on the new resident’s Medicare Part D prescription drug plan. Many facilities require that prescription drugs be purchased through their pharmacy. Until a change can be made under the special-enrollment-period rules, the cost of prescription drugs may be substantially higher.


As the population ages, more families will be struggling with long-term-care issues. The CPA can play a key role by:

  • Helping the family look beyond the immediate need for care and plan for the long term;
  • Revising the client’s financial plan to determine the financial resources available for care;
  • Educating the client and family on the uncertainties involved in budgeting for
    long-term care;
  • Coordinating payments to the various healthcare providers and ensuring that the client does not unnecessarily pay for any healthcare services out of pocket;
  • Assisting the client with avoiding the unexpected costs of care in a skilled-nursing facility.
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James Sullivan, CPA, PFS, works with his wife, Janet, who is an elder law attorney in Naperville, Illinois.

* PFP Section members, including PFS credential holders will benefit from additional Eldercare resources in Forefield Advisor on the AICPA’s PFP website at aicpa.org/pfp. Non-members can click here to join the section.