Paying for Long-Term Care
LONG-TERM CARE COSTS: What does long-term care cost? Well, that depends heavily on where you live. We’re writing this from north central Texas, where skilled nursing care (typically called a nursing home) in 2009 ranges from roughly $4000 to $7500 per month. If you live elsewhere in the U.S., that same month of care may range from $3600 to $15,000 per month. Here in Texas, assisted living typically runs $3500 to $7000 per month, nonmedical in-home care (companions and sitters) $18-25 an hour, adult day care $50 to $100 per day and independent living anywhere from $800 to $5000 per month, depending on the location and amenities. Costs where you live may be significantly higher or lower than our local rates.
So, how do you pay for needed care? There is no magic answer, but there are options available to many families. (For more in-depth information on paying for long-term care expenses, please take our classes on Paying for Long-Term Care and Government Programs.)
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THE MEDICARE MYTH: First, however, we must dispel the Medicare myth. Contrary to what many folks have been led to believe, Medicare does not pay for long-term care (with some very limited exceptions after a hospital stay). Medicare was designed to pay for doctors, hospitals and some diagnostic and laboratory costs and it does that very well. It was never intended to pay for in-home caregivers, adult day care, assisted living or nursing homes.
So, what other options are out there?
SELF-PAY: Many long-term care costs are simply paid by the person receiving care, from his or her own assets, or by the family, who contribute to the costs of care. This is called self-pay.
LONG-TERM CARE INSURANCE: Long-term care insurance is a specific type of insurance policy that can be purchased to pay for a nursing home, assisted living, in-home care or adult day care. The policies are most affordable when purchased while still fairly healthy, and the younger the better. Purchasers decide how much coverage they want: they decide how long a coverage period they want (for example, one year vs. lifetime coverage) and what the daily benefit rate will be (for example, $100 per day vs. $350 per day). Purchasers decide whether they want to buy coverage for facility care only or coverage for in-home care as well. These coverage decisions, plus the age and health of the person applying for the insurance coverage, determine the premium amount for the policy. Once the policy is in place, the premium amount should not increase unless the company increases premiums across the board for all its insureds (but your premium can’t be increased due to your age or declining health). Purchasers can add an inflation rider to help their chosen benefit amounts keep pace with ever-increasing health care costs. Insurance company premiums differ quite a bit on these policies, so it can be helpful to work with a long-term care insurance “broker” who can write policies for numerous companies; this person can compare coverages and premium rates for you across several different companies to help you find the most cost-effective policy for you.
MEDICAID: Medicaid is a combined federal and state benefits program that does help pay some long-term care expenses, but only for individuals who qualify financially. Unlike Medicare, which is available to most U.S. seniors, Medicaid is a “need-based” program which imposes both physical and financial qualifications for beneficiaries. While the basic program is the same across the nation, there are small state-to-state variations. There is one set of financial qualification rules for single individuals and another set for married couples. Medicaid is a very complex program and it may help you to learn the rules from a financial advisor who specializes in Medicaid or from an elder law attorney. If Medicaid might be necessary for you or a loved one, please obtain information on the program as soon as possible; making financial mistakes now can affect benefit eligibility years from now.
At this point, Medicaid is designed to pay primarily for nursing home care. States generally offer limited “waivers” to that rule to cover some assisted living or in-home care costs, but these programs differ widely from state to state.
One of the problems with Medicaid is that the program reimburses care providers at an abysmally low rate, which makes facilities or care providers reluctant to accept Medicaid patients. Some states do not require facilities or providers to accept Medicaid at all, so many of the care residences in those states will refuse to admit a patient whose payment source will be Medicaid. Some states require residences to accept a small percentage of their patients on Medicaid, but those “Medicaid beds” fill quickly and it can be quite difficult to be admitted to the facility of choice when Medicaid is the planned payment source. For that reason, it is important to remember that Medicaid is a safety net for those in need, but it should not be the goal of long-term care planning.
VA: The Veterans’ Administration does provide some little-known benefits for certain qualified veterans, both for facility care and in-home care. Benefit programs are available for a veteran’s non-military-related care needs if the veteran served in a defined war period (WWII, Korea, Vietnam, Persian Gulf) for one day or more, with a total military service of at least 90 days. If a veteran is housebound (cannot leave home alone and requires supervision for safety) , he or she may be entitled to a monthly pension to help pay for care services under the “Housebound” program. The amount depends on the veteran’s marital status and current income and assets. If the veteran needs regular aid or attendance for his or her daily safety (assisted living care levels often qualify), he or she may qualify for a pension under the Aid & Attendance program. Again, the amount of the pension depends on the veteran’s marital status and current income and assets.
REVERSE MORTGAGE: For many families, the home is the single biggest financial asset. For a senior needing care, a percentage of the equity in the home may be accessed through a reverse mortgage. These mortgages allow the person needing care, or his/her spouse, to remain in the home while using some of the equity in the home to pay for care. Typically, the mortgage does not need to be repaid until the last spouse leaves the home. Reverse mortgages can be a helpful way to pay for care, but families should work with a reputable lender and should research and understand the terms of the agreement before signing any documents.
LIFE INSURANCE: Many seniors have life insurance policies. If a life insurance policy is sizable, and if money is needed to provide for care, it is sometimes practical to liquidate the policy, prepay a funeral (best done through a small “burial policy”), and free up the remainder of the policy funds to meet care needs. It is possible to cash out a policy through the insurer, but generally only for cents on the dollar. There are now some reputable investment companies offering “viatical settlements” wherein they buy the policy from you at a fair rate (never the full benefit amount of the policy) and they basically wait for your eventual death, at which point they collect on the policy and make money on their investment. You get the money back for use during your lifetime; they make money when you die.
BE CREATIVE: Seniors are increasingly taking in trusted roommates who can provide needed assistance (for example, one can drive, while the other is a great cook). Consider inviting a family member to move in to provide needed help, or consider moving in with a family member who can help. Share expenses or pay for care whenever this is possible, but have a written agreement for any monies that change hands. It might be wise to consult an elder law attorney to discuss Medicaid planning and to develop the financial aspects of the care agreement so that you don’t create Medicaid ineligibility problems down the road. Accept offers of help from your church or local charities; this is sometimes a great way to find help with transportation, shopping or yard work. You’ve helped others over the years. Be gracious and allow someone to help you.
