8/20/2012 2:15 PM ET|
Will you get Dad's nursing-home bill?
A little-known law in many US states may leave you on the hook for your parents' nursing-home expenses if they can’t pay. Find out how to protect yourself.
You typically can't be held responsible for your parents' debts. The exception may be if the debt is a whopping nursing-home bill.
Pennsylvania's Superior Court recently ruled that a nursing home in that state could go after the son of an elderly woman who had left the country owing a $93,000 bill for a six-month stay.
Health Care & Retirement Corporation of America pursued the son, a 47-year-old restaurant owner named John Pittas, under the state's "filial responsibility" law. Twenty-eight other states and Puerto Rico have similar laws, which create a legal duty for children to financially support indigent parents.
According to Katherine Pearson of Penn State's Dickinson School of Law, the states with filial-responsibility laws (.pdf file) are: Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia and West Virginia.
In most states, the laws are seldom enforced. Filial-responsibility codes date from colonial times in America and, even before that, to the "poor laws" of the Elizabethan era in England, Pearson said. After the advent of Social Security, Medicare and Medicaid, which prevented seniors from falling into abject poverty, some states repealed their laws, and others stopped enforcing what remained on the books.
"What we've seen is that family members who can support each other, do support each other," Pearson said, "unless there's a strong personal reason why you don't."
When there has been enforcement in the recent past, it typically was because an adult child had defrauded the parent or was otherwise at fault in creating the parent's poverty.
That wasn't the case with Pittas, and elder-law attorneys are concerned that the court's ruling could encourage other nursing homes to sue family members for unpaid bills. Some worry that increasingly strapped states might use the laws to get reimbursement for custodial care.
"Just because they haven't done so yet doesn't mean that they won't," said elder-law attorney Michael Amoruso, a past president of the New York chapter of the National Academy of Elder Law Attorneys. "All the states are struggling for money."
Pennsylvania, South Dakota and North Dakota have filial-responsibility laws that specifically allow third parties -- such as nursing homes -- to pursue support cases, Pearson said. Without such language, the presumption had been that third parties couldn't sue. But now, attorneys for nursing homes are testing the laws in other states by filing lawsuits "on behalf of" the indigent parents, Pearson said.
"They're going to figure out how to do a third-party lawsuit without a third-party statute," Pearson predicted.
Still, elder-law attorneys say there are factors that may prevent a rash of collection actions against the children of nursing-home residents:
A potentially conflicting federal law. A federal Medicaid law prevents facilities from demanding that relatives act as "guarantors" before accepting a patient. The relatives' assets and income are not supposed to be considered in admission decisions. That would appear to conflict with nursing homes' attempts to collect from children of patients, even in states with filial-responsibility laws, said Harold Grodberg, an elder-law attorney in Clark, N.J.
Nursing homes' self-interest. Howard Krooks, the president-elect of the elder-law attorneys' academy, has represented nursing homes and says they're typically sensitive to their reputation in the community. That tends to soften their collection efforts, he said. "If you consistently go after the offspring of your patients," said Krooks, who practices in Boca Raton, Fla., "you may find your beds are more available."
A different interpretation of support. Filial-responsibility laws have traditionally been interpreted as requiring continuing monthly support, said Marielle Hazen, an elder-law attorney who practices in Harrisburg, Pa. "It shouldn't be used to get a lump sum settlement of a debt," Hazen said.
None of this has deterred collection attempts in Pennsylvania, which has what Krooks called "one of the most Draconian filial-responsibility laws in the country." Hazen said the Pittas case is far from isolated.
"This is not the only case where nursing homes have been successful," Hazen said. "Nursing homes are typically using it when there is a gap between private payment and eligibility for Medicaid."
The gap typically occurs after the patient's savings and other assets have been exhausted -- which can happen fairly quickly in high-cost states, where care often costs $12,000 a month -- but before he or she is approved for Medicaid, the government program that pays nursing-home bills for poor people. (Medicaid is a separate program from Medicare, which covers health expenses for people 65 and over. Medicare typically doesn't cover custodial costs, like those that make up most nursing-home care.)
Such gaps are growing more common as states make Medicaid tougher to get, elder-law attorneys said. The application process can involve reams of documents, and decisions by the states can take months -- sometimes more than a year -- which can lead to huge nursing-home debts.
Even when filial-responsibility laws aren't invoked, your parents' long-term care can still wreak havoc on your extended family's finances. One study found that people caring for their parents lose an average $304,000 each in wages, pensions and Social Security benefits, as I wrote in "The high cost of caring for parents."
When parents don't have the means to pay for their own care, their children often wind up reducing work hours or even quitting their jobs to help out. Caregivers may not be able to save adequately for their own retirements and long-term care, which means they may become a financial burden to their own kids.
So if your parents or in-laws are still alive, even if they're in good health now, you should consider taking the following steps:
- Find out if your parents are prepared. Do your folks have long-term-care insurance or substantial savings to pay nursing home bills? If you don't know, asking can be tricky, but one way to start is by talking about your own efforts to prepare for the future. For example, everyone needs a will, a health care directive and a power of attorney for finances, said Gregory French, the elder-law academy's current president and an elder-law attorney in Cincinnati. The will expresses how you want your estate divided after your death, while the two other documents help others make decisions for you if you become incapacitated. Once you have your own documents in place, ask if your parents have this paperwork ready. If not, ask if they'd like help preparing it. "A discussion about long-term care fits very naturally into that.," French said. (For more on preparing for incapacity, read "3 must-have legal papers.")
- Consider long-term-care insurance. If your parents are rich, they should be able to pay for long-term care directly, although the tab may reduce your inheritance. If they're poor, they'll likely wind up on Medicaid. Everybody in between should at least consider long-term-care insurance, elder-law attorneys said. "We have a lot of clients who pay or help pay for their parents' long-term-care insurance," said elder-law attorney Ronald Fatoullah of Great Neck, N.Y. A life insurance policy with a long-term-care rider is another option for families with the means to pay the premium, said Fatoullah, who serves on the elder-law academy's long-term-care task force. The problem with either type of insurance is that coverage isn't cheap, and health problems can prevent getting it at all. A couple, both aged 55, could expect to pay an average $2,350 a year for long-term-care insurance, according to American Association for Long-Term Care Insurance, with premiums and denial rates rising sharply with age.
- Be careful about accepting gifts. Families often try to get around Medicaid rules, which require applicants to be essentially impoverished before they can get coverage, by transferring a parent's house into the children's names, for example, or making cash gifts. All that does is delay the parent's eligibility for Medicaid, perhaps forever, said Elizabeth Gray, who practices elder law in Fairfax, Va. Furthermore, nursing homes have been known to go after the recipients for an amount equal to the transfer. If your parent may end up on Medicaid, get advice from an elder-law attorney before accepting any transfers or gifts. If the money has already changed hands, keep it in cash rather than spending it, because one way to "erase" the Medicaid penalty for such transfers is to give the money back, Grodberg said.
- Take charge of the Medicaid application. Your parent's nursing home may offer to help with the application for government assistance, but Hazen has seen cases where nursing homes not only filed inadequate applications but then failed to tell families the applications had been denied in time for them to file an appeal. Consider hiring an elder-law attorney or a geriatric-care manager to help guide you through the paperwork.
- Get good advice. Don't rely on relatives, hearsay or random Internet searches when applying for Medicaid or dealing with nursing-home billing departments. This is complicated stuff, and one wrong move can have expensive consequences. Even if you're not able to pay for extensive, continuing legal advice, consider at least one session with an elder-law attorney familiar with your state's rules and regulations. "If someone gets good advice and follows through, they should be OK," Grodberg said. "It's the people who think they can do it on their own that are going to get hurt."
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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