Long Term Care is a very personal issue to me. The only argument I ever remember having with my father was on the topic of long term care. He was a doctor and did not believe he needed it. He would assure me if he did that he would “just take a few pills” and end his misery, which, of course, was an unacceptable answer to his daughter. Four short years after this argument (that I won and he bought long term care insurance), he started to show strange symptoms of premature memory loss. My father had a very rare illness caused by a head injury from a car accident in his 20’s. As the disease progressed, he needed long term care assistance in his home. He was only 59 years old.
It started more as custodial care but eventually moved to round-the-clock care, and we even had to put an elevator in the house. As you can imagine, the cost of his care was very high, and we would not have been able to afford it on our own. We lost him at 62 years of age, and those last three years were so hard on the family. I cannot imagine if we also had the extra stress of not having insurance to help us.
After 22 years as Certified Financial Planner, this is a topic I have great passion around and have helped families face this difficult issue. I have also sat across from many clients who also told me that they would “just end it” if they were faced with this type of need. What I tell them and will share with you is the opposite happens. My father wanted to live, even with all the pain he was in. He wanted nothing more than to see his grandchildren grow, and we would have done anything to make him comfortable.
If you walk into my office and are 40+ years old, we are discussing long term care options. It’s not always an easy topic to discuss, but I know personally how hard it is to make decisions when someone you love needs this care. Even more, I know how expensive it is to take care of loved one with the dignity they deserve. I have owned my own long-term care insurance policy since I was 39 years old and never intend to miss a payment. I have seen too much. And whether or not you have been affected by someone with long-term care needs, the chances are high you or someone you love will eventually require assistance.
Long-Term Care Affects Us All
- In 2010, 40 million Americans were age 65 or older. By 2050 that number is expected to more than double to 88 million.
- In 2010, there were 5.5 million Americans over age 85, but by 2050, there will likely be 19 million. These are the individuals who most likely need long-term care assistance.
- An average nursing home stay is almost two years, costing between $80,000-90,000 per year.
- 21.5% of long-term care costs were paid directly by patients’ spouses or adult children.
This is an issue that faces all of us. 7 out 10 will require some sort of long-term care assistance in their lives. Many of us associate long-term care with nursing homes but it also includes assisted living facilities, adult day care and paid caregivers. The likelihood of needing some sort long-term care assistance is high and who pays for this care?
Our Medicare/Medicaid Misperception on Long Term Care
There is a widespread belief that Medicare and/or Medicaid will cover your long-term care costs. The answer is yes and no. Let me explain.
Medicare Does Not Cover Long-Term Care Costs
Medicare provides coverage for rehabilitation, but not long-term care (i.e. an extended or permanent nursing home stay). Medicare will pay for up to 100 days of convalescent care if an individual has spent at least three days in a hospital for medically necessary care. Immediately upon discharge, the individual must go to a Medicare-certified skilled nursing facility and be expected to recover and return home to qualify for this coverage.
PLEASE NOTE: Most health insurance, including Medicare, does not cover nursing home care. However, do not drop a loved one’s health care insurance when they enter a nursing home. They still need health insurance or Medicare to cover their medical expenses while in a nursing home.
Medicaid Covers Long-Term Care Costs After Assets Have Been Depleted
If an individual cannot cover their long-term care costs or they have exhausted their assets, then they become eligible for assistance from Medicaid. To qualify for Medicaid, applicants must have minimal assets or a poverty level income, generally no more than $2,000. For married couples, every state has its own “spousal protection” rules so that the healthy spouse can continue to live in the community. Be aware there is still a maximum amount of assets s/he can keep. Most individuals who need long-term care services will initially cover expenses with their own assets until they qualify for Medicaid.
Gifting Assets Can Delay Medicaid Eligibility
Some of you may think the answer is to simply gift assets to children and/or grandkids, so you may qualify for Medicaid while still leaving a legacy to your heirs. If you do this within five years of applying for Medicaid, you could be disqualified from receiving its assistance for a certain period of time, which means until your penalty period is completed, you will have to pay the costs out-of-pocket.
PLEASE NOTE: There is nothing illegal or wrong with dispersing your assets prior to needing Medicaid. Depending on your individual situation, it may or may not make sense to do this. Please seek the advice of a reputable lawyer specializing in elder care to fully understand the ramifications of doing so regarding your personal situation, including taxes and potential ineligibility period of Medicaid benefits. And don’t forget, once you give away your assets, you cannot control how they are used or get them back.
How Can I Protect My Home?
Your home is an exempt asset, but if the owner dies while receiving Medicaid benefits, the government must try to recoup their costs from their estate. They cannot put a lien against a home if a spouse, disabled adult child or minor child currently resides there. To avoid this, some may choose to add a child’s name to their deed to protect their home. This is considered a gift by Medicaid and again may make you ineligible for Medicaid for a period of time.
Beyond that, this is not a decision to be taken lightly. Putting a child on your deed effectively makes them a co-owner. You cannot sell your home without their permission or if they die before you, their heirs now co-own your home. And most importantly, your home is now an asset of your child, which means your home could be used as collateral if they have financial problems or are sued.
Don’t Be Afraid to Seek Professional Help
Rules are frequently changing and I suspect they will only continue to do so. There is so much misinformation out there and too many people make decisions based on incorrect or outdated information. Do not make knee-jerk reactions out of fear. I strongly encourage you to work with lawyer experienced in elder law or Medicaid law in your state. They can help you make informed decisions regarding your personal situation.
How Do I Pay for Long-Term Care?
This is both simple and complicated as there are really are only three options.
Your Own Assets
You and/or your parents foot the bill in its entirety. This may be a good option if the individual isn’t expected to have a pro-longed stay or has significant assets. You may also want to consider potentially covering the cost for the parent who needs long-term care first. This way the healthy spouse does not need to worry meeting asset and income levels for Medicaid coverage. Again, there are rules so a healthy spouse isn’t impoverished, but they still cannot have substantial assets and may be at risk of their assets running out.
We don’t always think about how we will pay for long-term care costs. You may want to add long-term care as an investment goal and work with your financial advisor to create a plan to cover your estimated expenses.
Long-Term Care Insurance Covers Costs
Long-term care insurance policies reimburse a predetermined daily limit for nursing-home care, home-health care or personal or adult day care services that assist with daily living activities, such as bathing, dressing, or eating. You select a range of care options and benefits that allow you to get the services you need, where you need them.
The cost of your long-term care policy is based on:
- How old you are when you buy the policy
- The maximum amount that a policy will pay per day
- The maximum number of days (years) that a policy will pay
- The maximum amount per day times the number of days determines the lifetime maximum amount that the policy will pay.
- Any optional benefits you choose, such as benefits that increase with inflation
I won’t pretend that long-term care insurance is cheap. For most of my career LTC insurance premiums did not increase, which led many policy holders to believe they never would. But in the past few years premiums have increased almost every year. Now my mother calls and asks if she should pay her long-term care insurance premium, and I assure her it is worth the additional cost. So if you have experienced premium increases, you are not alone, and I encourage you to continue paying the premiums as well.
Additionally it is getting increasingly difficult to find long-term care insurance, so if this is an option you and/or your parents are interested in pursuing, I suggest looking into it immediately. If you and/or your parents don’t qualify, then you need to create a long-term care plan with your personal assets and potentially Medicaid. Or if it is cost-prohibitive for your parents, perhaps you and your siblings could cover the premiums for them.
Qualify for Medicaid
If you do not have long-term care insurance or your coverage runs out and you have depleted your assets, you may qualify and apply for Medicaid assistance.
Stay Focused on What Matters Most
I know this is a lot to absorb and can be very overwhelming. Do not feel you have to do this alone. There are professionals from elder care lawyers, financial advisors, tax attorneys and/or accountants that can help you make informed decisions on your individual situation.
And most importantly, remember why you are doing this. Everyone wants and deserves to be treated with respect and dignity when they are no longer able to care for themselves. Make decisions now as to how you (or your parents) want to be treated when the time comes so you can afford to make them a reality.
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