The Wall Street Journal on Thursday examined how U.S. nursing homes are "forcing out frail and ill residents" in an effort to "replac[e] them with shorter-term residents likely to bring more revenue." Federal law allows nursing homes to evict residents for six reasons: they are healthy enough to return home; they require care not offered at the nursing home; they risk the health of other residents or staff; they endanger the safety of other residents or staff; they do not pay their bills; or the nursing home closes. However, some state officials and patient advocates say that nursing homes "often go too far, seeking to evict those who are merely inconvenient or too costly," such as residents with dementia or demanding families.  Medicaid beneficiaries are at greater risk of eviction because Medicaid reimbursement rates are as little as half of what nursing homes make from residents who pay their bills out-of-pocket, with private coverage or through Medicare, according to the Journal. The Journal reports that Medicaid reimbursement payments to nursing homes in 2007 were $4.4 billion less than the cost of treating beneficiaries. According to Michael Wiederhorn, a health care analyst for Oppenheimer, approximately two-thirds of nursing home residents who stay in facilities more than 90 days depend on Medicaid to pay their bills.

Assisted Living Facility Costs as Tax Deductions

A recent NAELA News article by Robert Anderson discusses the process for deducting assisted living facility (ALF) costs on federal individual income tax returns. Internal Revenue Code (IRC) § 7702B provides rules for deducting certain qualified long-term care costs as medical expenses. Normally, the costs of nursing home care should be deductible, but the status of ALF costs has not been as clear.

For ALF residents, qualified long-term care costs are “necessary rehabilitative services, maintenance or personal care services that are (1) required by a chronically ill individual, and (2) provided pursuant to a plan of care by a licensed health care practitioner.” The ALF resident must first qualify as a chronically ill individual. The resident can meet this definition if within the previous 12 months, a licensed healthcare practitioner certifies that the resident meets one of two descriptions pursuant to IRC § 7702B(c)(2):

1. The resident is unable to perform at least two activities of daily living (ADLs) without substantial assistance from another individual for at least 90 days due to a loss of functional capacity. ADLs are eating, toileting, transferring, bathing, dressing, and continence.

2. The resident requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.

Maintenance or personal care services provide assistance for a chronically ill individual with his or her disabilities; therefore, if an ALF resident needs help with two ADLs, then the assistance provided by the ALF qualifies as personal care services. Likewise, if the ALF protects the individual from safety and health threats due to severe cognitive impairments, then the assistance provided by the ALF qualifies as personal care services. The certification of the chronic illness requirement must be done within the preceding 12 months. The certifying licensed care practitioner can be any physician, registered professional nurse, or licensed social worker, and this practitioner does not have to be an employee of the ALF, although this practitioner could be. The licensed care practitioner must personally examine the resident and provide a written opinion. The opinion should be obtained prior to admission to the ALF.

The plan of care is not defined within the Internal Revenue Code. Federal statutes require that nursing facilities have a written plan of care for each resident. Although written care plans for ALFs are not required by federal statutes, most ALFs prepare them. The plan of care must be prepared by a licensed care practitioner, and it should be prepared at or as soon after admission to the ALF as possible.

If these requirements are satisfied, then 100% of the costs of the ALF (including room and board) are deductible on the resident’s 1040, Schedule A, to the extent that the costs are not reimbursed by government benefits or insurance. Under IRC § 213 (a), the resident can claim an itemized deduction for unreimbursed medical expenses to the extent that such expenses exceed 7.5% of adjusted gross income. These expenses include the qualified long-term care expenses, as well as insurance premiums and other eligible medical expenses.

If the resident does not meet the requirements of IRC § 7702B, then the resident can still deduct the percentage of the ALF costs attributed to nursing services, pursuant to IRC § 213. The room and board and personal services costs would not be deductible. The ALF should provide an estimate of the deductible portion of its costs, and the taxpayer can attach the statement to the Schedule A. Typically 30% to 40% of the ALF costs are for nursing services.

Being physically fit could hold back the advance of Alzheimer's disease, University of Kansas researchers have suggested.  Their study, published in the journal Neurology, looked at 121 people aged over 60, around half of them in the early stages of the disease.  Those with Alzheimer's who were less fit had four times more signs of brain shrinkage than those who were fit.  The Alzheimer's Research Trust said other research showed exercise reduced the risk of dementia.  People with early Alzheimer's disease may be able to preserve their brain function for a longer period of time by exercising regularly.  Other studies looking at the relationship between dementia and exercise have tended to focus on whether being active can reduce the risk of the condition developing in the first place.