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Nursing Home Financial Assistance in P.E.I.

Many people have questions about the impact of nursing home costs in PEI, and this impact was reduced substantially by changes to the Long-Term Care Subsidization Act and related regulations effective January 1, 2007. Know that your home and your assets will no longer be taken by the PEI government to pay for nursing home costs incurred after that date under current law.  (However, bills outstanding from earlier years must still be paid).

Admission to a long-term care facility involves two steps. The first is a needs assessment from a medical perspective. The second, and the topic of this article, is a financial assessment to determine if financial subsidies are available to you.

If admitted to a nursing home, what will I need to pay for?

The only expenses that must be paid by a resident will be the costs of accommodation, including room and board. The government will pay the costs of nursing and medical care at the home. In a news release dated January 25, 2007, the government stated,

“The Department of Health will cover basic health care costs which include nursing and personal care, incontinence and infection control measures and basic supplies for hygiene and grooming. Residents will pay the accommodation costs which will cover room and board, including meal service, housekeeping, laundry and social/recreational activities. Residents will continue to be responsible for personal expenses which include, but are not limited to, eyeglasses, hearing aids, dental service, telephone service, hairdressing, dry cleaning, ambulance service and general transportation.

The Health PEI publication, “Facts About Nursing Home Costs – 2018”, states that the amount of the accommodation charge to self-paying residents for 2018 begins at $77.60 per day for government manors, which means that the cost to you would be $28,324 for a full year, before any subsidies for which you may qualify.  For a private nursing home, you would pay costs determined by that home, with a maximum daily subsidy (if you are eligible) up to $90.60 per day or $33,069 annually.  The rates are periodically updated, but with no regularity.

Must I sell my assets to pay for my nursing home accommodations?

Effective for costs incurred starting January 1, 2007, your assets will no longer be considered when you apply for government assistance. It is only your income that will be used to pay nursing home expenses. Therefore, any bank accounts, investments, real estate and other property owned by a family need not be sold to help pay for such care. However, any income generated from such property is counted. Common forms of income include Canada Pension Plan, Old Age Security, pensions, rent, interest, dividends, capital gains and registered retirement plan withdrawals.

Of course, if there is still a spouse living at home, there may be a need to sell assets to pay for that person’s ongoing needs if his or her expenses exceed the income available to him or her.  If one-half of a family’s income is used to pay for the nursing home costs of one spouse, the remaining spouse only has the other half of the family income to pay all of the ongoing expenses of living in the family home.  Sometimes this income is not enough money, so investments and maybe even the family home need to be sold.  More on this below.

How is eligibility for government subsidies determined?

The application for financial assistance is separate from the application for admission to a long-term care facility. For determining eligibility for subsidies, income is first defined as the amount reported on line 236 of your income tax return for the most recent year. Where the person is married (or common-law), the income of both parties will be combined and then divided equally. If there are other dependants (e.g. children), a different formula is used.

Certain amounts may then be deducted from line 236 of your income tax return, such as some income amounts related to prior years, CPP death benefits, and any other amounts that the Minister of Health may exempt.  If the income figure is less than $35,000 (as indicated by Health PEI in the above noted 2018 fact sheet), individuals may qualify for a subsidy.  As a nursing home resident, you can retain any of your income in excess of the accommodation charges.

After admission to a nursing home, how is ongoing eligibility for financial assistance assessed?

The person’s ability to pay will be reassessed each year. However, we understand from discussions with government officials that it is “real income” that is used for this annual financial assessment. Line 236 will be a starting point, but this figure may be adjusted for non-taxable income and other adjustments to reach a more accurate evaluation of the resident’s income.  For example, payments from long-term care insurance and Registered Disability Savings Plans may be added, as well as a reasonable amount for rent income if the family home is occupied by someone who is not paying rent and is not a dependant of the applicant. Conversely, taxable dividends reported on your tax return are higher than the actual payments received, and these should be adjusted downwards.  These types of adjustments are logical because they help convert your income for tax purposes to equal your actual cash income.  You may wish to review such adjustments with Health PEI personnel to ensure you understand them.

If computation of all income differs from the initial calculation, then the subsidy will be recalculated for that year. For example, assume you enter a nursing home in 2018, and you qualify for a subsidy based on your 2017 tax return. When you file your 2018 tax return (in early 2019), it will be reviewed. If line 236 plus any adjustments exceed the initial calculation, then the 2018 subsidy may be revised (and your future payments adjusted to take the retroactive revision into account).

As noted earlier, this understanding is based on our discussions with a government official, and policy is always subject to change. Therefore, the system may not function exactly as outlined here and may differ in individual circumstances.

What if my spouse cannot afford to live in the family home after my admission to a nursing home?

After doing the above calculations, variations may be made if more than one-half of the family income is needed by the applicant’s spouse or dependants to meet financial liabilities or to maintain a reasonable standard of living.  A reasonable standard of living is defined as equal to the sum of the annual maximums of Old Age Security and the Guaranteed Income Supplement.  If one-half of family income falls below this threshold, then the subsidy may be increased so that the person remaining at home has this amount of income.  These amounts are adjusted regularly for inflation, but as of June 2018, the total is $17,642, which is not a lot of money to maintain a family home and meet your living expenses.

If you are married, and live in a large family home after your spouse has moved to a nursing home, one-half of combined income may be insufficient for you to maintain the home, and you may have no other financial resources from which to draw.  It is likely that you will need to move to less expensive accommodations.   The government may allow your spouse’s accommodations to be temporarily subsidized at a higher level than normally calculated until you have time to move.

Can I make changes prior to admission to a nursing home to increase my subsidy?

The government can look back two years before the date of application to see if the “applicant has transferred or reduced income, or divested himself or herself of any income-producing asset” in order to increase their subsity. If, “in the opinion of the Director, the transfer or reduction of income, or divestment of an income-producing asset, was made for the purpose of making the applicant eligible for financial assistance”, subsidization may be refused [Regulation 10(1)]. For example, if you give your investment portfolio to your children, you will no longer receive the related interest, dividends and capital gains. If you did this so that you would not have to use the income for paying your nursing home costs, the government could refuse admission to the home unless arrangements for payment are made.

In my opinion, trying to “beat the system”, such as giving money to your family to reduce your income, is a very high risk manoeuver, especially if you expect them to keep the money for your own use.  What if you give your investments to a child, and the child spends it, goes through bankruptcy, or holds it in joint name with a spouse and then divorces?  For the sake of increasing your subsidy by the amount of income from the asset, you could lose the whole asset.  Be sure to review any aggressive plans with a qualified financial planner and/or your legal counsel.

Remember that under the current rules, your investment principal will be safe; it is the income that must be used. A question arises about what will happen if income-producing assets (e.g. investments) are sold or re-structured after you are in a nursing home, and consequently your income declines.   You would not be entitled to an increased subsidy if you made such changes to increase the subsidy.  However, this answer may be different if the proceeds are used for purposes permitted by government policy. We cannot advise as to what the allowable purposes may be, but repayment of liabilities, major household repairs and prepayment of funeral expenses might be acceptable.

Is my home safe or will I need to sell it?

Only your “income”, not assets such as your home, must be used to pay for your care. The government will not require the sale of your home to meet nursing home costs. However, as explained above, in the case of a couple where one person needs long-term care, it is one-half of the combined income of both individuals that is used for determining the subsidy. If your spouse is placed in a nursing home and you are remaining in the family home and cannot afford to meet your expenses, you need to look at various ways to deal with these costs. Selling the home or other assets may be options; however, this will be your choice based on personal financial planning considerations. It is not a government decision.

Other issues

What about residents of nursing homes prior to 2007?
These residents will be eligible for the new rules as well. Debts accumulated and owing at December 31, 2006 will still be owed by the resident and his or her estate under normal circumstances.

What if a person has a life insurance policy requiring annual premium payments and income is not sufficient to pay for these?
The government will still use your income tax return to assess your need for subsidy. You may need to sell assets to pay such premiums.  We suggest that you ask your insurance beneficiaries (who are going to receive the proceeds of your insurance) to pay your premiums.  Permanent insurance policies, such as whole life, can be a great investment for your beneficiaries – for a few dollars in premiums they may receive a substantial tax-free death benefit when you die.

What if a person does not require nursing home care but cannot afford the costs of living in a senior’s residence?
In such a case, the Long-term Care Subsidization Act does not apply, and the rules discussed here are irrelevant. A person living in a senior’s apartment or a community care facility (also called an assisted living facility) is no different from anyone living in a home they cannot afford.  They will need to look for more affordable housing or seek financial help from family, friends or social assistance (also known as welfare).

What happens to the monthly comfort allowance if it is not spent?
Residents are given a monthly allowance for personal use (which is $123.00 per month as of June 2018). The comfort allowance accumulates and any balance remaining at death will be paid to the resident’s estate, after any other debts owing to the government, such as pre-2007 debts, are paid.

Who do I contact for further information?

For information on eligibility for entrance to a nursing home, you may contact one of the five Home Care Offices. Contact telephone numbers are as follows: Charlottetown (Hillsborough Hospital) – 902-368-4790; Summerside (Wedgewood Manor) – 902-888-8440; O’Leary Community Hospital – 902-859-8730; Montague (Riverview Manor) 902-838-0786, and Souris Hospital – 902-687-7096. For information on subsidies, contact the Long-term Care Subsidization Office at 1-888-365-5313. The government web site for Health PEI, where long-term nursing care fact sheets and contact information can be obtained is www.healthpei.ca/longtermcare.

Blair Corkum, CPA, CA, R.F.P., CFP, CFDS, CLU, CHS holds his Chartered Professional Accountant, Chartered Accountant, Registered Financial Planner, Chartered Financial Divorce Specialist as well as several other financial planning related designations. Blair offers hourly based fee-only personal financial planning, holds no investment or insurance licenses, and receives no commissions or referral fees. This publication should not be construed as legal or investment advice. It is neither a definitive analysis of the law nor a substitute for professional advice which you should obtain before acting on information in this article. Information may change as a result of legislation or regulations issued after this article was written.©Blair Corkum