There’s a great deal of talk today about the “graying of America.” Thanks to advances in medical technology, many people are now living 20 or more years beyond normal retirement age. However, quite a few of these people must deal with poor health during those years. And, the increased longevity, coupled with expanded health care needs, can place enormous social and financial strain on these individuals and their loved ones.
Long-term care or the need for assisted living doesn’t just affect the elderly though. While nearly two-thirds of people over age 65 will need some type of care, either in a facility or at home, forty percent of the people receiving long-term care services are actually between the ages of 18 and 64. Even more people in this age bracket are affected by long-term care because they may be bearing the financial burden of supporting an elderly family member.
Families often go to great lengths to provide for their loved ones who, because of physical and mental impairments can no longer care for themselves. Often, when a family is unable to care for their loved one, they must rely on formal institutions, such as nursing homes or assisted care living facilities, to provide care and other services. This care can be extremely costly and not always easy to find.
How Much Does Long-Term Care Cost?
The median national monthly rate for a nursing home is $3,185. That’s over $38,000 per year. But this is just an average. The cost can run well into six figures per year in some areas of the country and for specialized care needs.
The good news is that many of those who need care are not sick enough to need skilled nursing home care. Often they can get by at home with the assistance of a home health care provider. However, with the average hourly cost of a home care provider at $19, this too can add up rather quickly. In fact, for someone needing round-the-clock care in their home, the tab can potentially run to over $160,000 per year.
What About Medicare and Medicaid?
Many are under the misconception that programs such as Medicare or Medicaid will pay for long-term care services. However, this is only partially true. In order to qualify for Medicaid long-term care coverage, one must be at the poverty level. The qualification amount differs from state to state. But on average, a single individual must have financial assets of no more than $20,000.
While Medicare does not require a financial asset test, it has several criteria of its own in terms of what qualifies a person for long term care services. For example, in order for Medicare to pay for nursing home expenses, a person must meet all of the following criteria:
- You must require daily skilled care which, as a practical matter, can only be provided in a skilled nursing facility on an inpatient basis
- You must have been in the hospital for three consecutive days, not including the day of discharge, before entering a skilled nursing facility that is certified by Medicare
- You must then be admitted to the skilled nursing facility for the same condition for which you were treated in the hospital
- You must also be admitted to the skilled nursing facility within 30 days of your discharge from the hospital, and
- A medical professional must certify that they need skilled nursing or rehabilitation services on a daily basis
Then, if all of these criteria are met, Medicare will pay for the first 20 days of facility care. For the next 80 days, Medicare will pay all charges except a daily co-insurance amount. That daily co-insurance amount required by the patient is $137.50. And, if more than 100 days of care is needed, the patient must pay all charges after day 100. Therefore, even if a patient meets Medicare’s requirements for nursing home coverage, they must still pay $11,000 out of pocket within the first 100 days.
How to Pay for Long-Term Care Services
With many families already financially stretched by every day bills, how can you prepare for the cost of a long-term care need?
One way is through the purchase of a long-term care insurance policy. Long-term care insurance protects assets, avoids dependency on government programs, and allows the insured to retain the freedom of choice in terms of where they receive care.
Long-term care insurance plans can cover care in a facility as well as care at the recipient’s home. This not only allows financial independence by having some or all of the costs paid for by the insurance, but also physical independence in that the recipient can remain in the comfort of their own home.
Tax Treatment: Premiums for long-term care policies will be treated as a medical expense and will be deductible to the extent that they, along with other non reimbursable medical expenses, exceed 7.5 percent of the insured’s adjusted gross income.
Once insured under a long-term care insurance policy, the care recipient is covered for a certain pre-set dollar amount of care expenses, for a certain period of time. Some policies even offer a lifetime coverage option, meaning that care costs will be insured for as long as the recipient needs it.
There are many ways to design a plan, making long-term care insurance affordable for most people. In fact, the policy premium could even be viewed as an investment that protects hard-earned savings dollars, and allowing those dollars to be used for other things such as basic living expenses, food, or travel.
Many people who have spent a lifetime building up savings are now being forced to drain those dollars to pay for the high cost of long-term care. But with long-term care insurance, individuals can be provided an instant payment source and an alternative to liquidating a lifetime of savings. So in addition to auto, home and life insurance; long-term car insurance is worth considering because a couple of hundred dollars a month is better than paying $100 to $200 per day when you get older and have a much smaller income.
