The national median amount paid for assisted living residences in 2017 was $3,750 per month. For a semi-private room in a nursing home that cost was $7,148, and for a private room in a nursing home that cost was $8,121, according to the 2017 Genworth Cost of Care Survey. A parent in need of long term care can burn through cash reserves quickly. Adult children who help their parents sign the residency agreement for their long-term care facility can potentially find themselves liable for their parents’ eldercare bills, said Lori Smetanka, executive director of the National Consumer Voice for Quality Long-Term Care.
Often the adult child who contacts the nursing home, discusses financial arrangements with the facility administrator, and signs admission papers on behalf of the parents faces the daunting task of ensuring they do not sign a document agreeing to become personally financially responsible for a parent’s long term care.
During this admissions process, nursing homes often ask a family member to become a “responsible party” or “cosigner” for a new resident, sometimes requiring this commitment before the nursing home will agree to take the parents as a resident. It is not always clear from the discussions and paperwork what it means to be the responsible party.
On one hand, it might just mean being the person who is contacted during emergencies and who is a decision-maker regarding medical issues (named in the parent’s advance health care directive) or financial matters (named in a power of attorney for finances) when the resident is incapacitated. However, some nursing homes try to use responsible-party agreements to get the adult child to guarantee payment of the parent’s nursing home fees before it allows the parent to become a resident. Being put in this position by the nursing home can make for a very difficult situation: The adult child does not want to jeopardize their parents’ chance to become a resident by refusing to pay, but accepting the responsibility could mean a tremendous financial burden down the road.
In the past, some nursing home facilities required a family member to co-sign for their parent as a condition of admission, making them legally responsible for future bills. That is no longer allowed, Smetanka said, noting new federal regulations were passed in October 2016 that prohibit nursing homes from requiring or even requesting third party guarantee for payment.
Requiring a family member to agree to be the financially responsible party for a nursing home resident is illegal under federal law, in Title 42 of the Code of Federal Regulations, section 483.15(a)(3). Under this law, nursing homes are not supposed to ask if a family member wants to become a responsible party. Nonetheless, some nursing home agreements contain fine print that claim to make a responsible party or cosigner personally responsible for the resident’s bills. If a nursing home attempts to enforce such an agreement, the person who signed the papers may need legal help to get out from under the nursing home’s claim.
There is a circumstance in which it is legal for a nursing home to ask an adult child to agree to pay the nursing home bills. If the adult child has power of attorney over the parent’s finances, it is lawful for the nursing home to ask the child to agree — in the role of power of attorney — to use the parents’ funds to pay the nursing home bills. Signing that agreement, however, does not make the adult child personally responsible for the bills.
A different situation may exist if a nursing home initially rejects a person as a resident because the person has insufficient funds to pay for care, and an adult child or other family member then offers to become financially responsible for the bills. This may be a lawful financial-responsibility agreement if the offer to pay the bills is truly voluntary.
Lori Smetanka stated that family members should read all contracts carefully and never co-sign if they do not intend to use their own resources to pay the tab after their parents’ assets run dry. In some cases, the language on residency or admission agreements can be confusing or even deceptive. That’s particularly good advice in cases where the adult child is designated to manage their parents’ finances through a power of attorney legal document, Lori Smetanka said. Any residency contract he or she signs should be clear that only the parents’ funds, and not those of the adult child, will be used to cover costs — again, assuming that arrangement reflects the adult child’s wishes, said Smetanka.
We all want the best for our parents but their long-term care bills need not compromise our own financial well-being. To protect your personal savings it is important to review all residency contracts carefully, and initiate dialogue with your family to ensure that caregivers are fairly compensated. Severns & Howard is available to help you and your family initiate that dialogue, review agreements, answer questions, and guide you through this process.
Citations: Joseph L. Matthews from Caring.com on November 8, 2016; Casey Kelly-Barton from SeniorAdvisor.com; and Shelly Gigante from MassMutual.com on November 2, 2017.