Paying For Long-Term Care
When people make plans to retire, spending more time with family and friends, traveling, and doing other things that they enjoy are typically at the top of their list. What is usually not in the plans, however, is paying for long-term care in the event of an unexpected health crisis.
Long-term care involves providing a variety of medical and non-medical support services to people who can no longer perform daily living activities on their own. According to the U.S. Department of Health and Human Services, someone turning 65 years old today has almost a 70 percent chance of needing some type of long-term care services and support in their remaining years.
Depending on the type and length of services received, long-term care costs can consume a significant portion of a monthly income or personal savings. While older adults may think that their health or disability insurance will cover long-term care costs, most insurance policies include limited benefits or do not include any long-term care coverage at all.
According to the National Institute on Aging (NIA), in many cases, people will need to find other ways to pay for their care, including personal funds, federal and state government programs, and private financing options.
The following are some common financing options:
1. Personal Funds
Many older adults cover long-term care with their personal or “out-of-pocket” funds, such as personal savings, retirement funds, investment income, or proceeds from property sales. Out-of-pocket expenses are also used to pay for caregiving services in assisted living facilities and continuing care retirement communities.
At first, family and friends may offer free assistance, such as transportation and personal care. But as time goes on, paid professional services may become necessary as the older adult’s needs grow and family and friends can no longer take care of these needs.
2. Government Healthcare Programs
When it comes to paying for long-term care, one of the first programs older adults and their families ask about is Medicare, the single largest payer for health care services in the United States. Medicare, however, does not cover long-term care or assisted living expenses. The federal insurance program only pays for certain home healthcare services that doctors certify that their patients need, such as skilled nursing care, physical therapy, occupational therapy, and home health aide services.
Medicaid, on the other hand, pays for some long-term care services and community-based services. Medicaid, a joint federal and state health care program, provides comprehensive health care for low-income adults and children. While income requirements to qualify for Medicaid vary by state, typically a person’s assets (excluding a person’s home and one car) cannot exceed $2,000 as an individual or $3,000 as a married couple, according to Forbes Advisor.
Older adults who qualify for Medicaid may be eligible to receive in-home, long-term care services, such as:
- Visiting nurses
- Personal care services
- Laundry and cleaning support
- Case management
Medicaid also provides long-term care services in nursing homes. Those who need the type of care that would require them to be in a nursing home may qualify to receive the same type of care in their homes.
The types of services Medicaid provides vary depending on the older adult’s needs and the services provided by each state’s Medicaid program.
Besides Medicaid and Medicare, the U.S. Department of Veterans Affairs (VA) covers some long-term care for eligible veterans who live at home or in an assisted living facility. The VA’s long-term care services include:
- 24/7 nursing and medical care
- Physical therapy
- Help with daily living activities (like bathing, dressing, making meals, and taking medicine)
- Comfort care and help with managing pain
- Support for caregivers who may need skilled help or a break so they can work, travel, or run errands
Long-term care can be provided in many different settings, some run by the VA and others by state or community organizations that the VA inspects and approves.
4. Long-term care insurance
Long-term care insurance covers a range of services and support for people who need help with basic daily living activities, such as bathing, dressing, grooming, toileting, transferring to or from a bed or chair, or eating.
Many policies offer in-home services, such as skilled nursing care, personal care attendants, and homemaker services. Long-term insurance also pays for skilled nursing care, room and board, and other services provided in a nursing home or assisted living facility.
Some financial experts say long-term care insurance is costly primarily because of the high cost of long-term care, especially when someone stays in a nursing home or an assisted living facility.
According to the American Association for Long-term Care Insurance, the average cost of long-term care insurance in 2023 for benefits equal to
$165,000 was:
- $1,200 a year for a 60-year-old man
- $1,960 a year for a 60-year-old woman
- $2,550 (combined) for a couple both aged 60
Purchasing long-term care insurance might be a good idea for younger, generally healthy people who have little chance of requiring long-term care over the next 25 years. Older people who have pre-existing conditions and require greater benefits may pay more for coverage than a healthier person or might be denied coverage. In addition, someone receiving end-of-life care services may not be eligible for long-term care insurance. These are among the many factors to consider before purchasing long-term care insurance.
5. Life Insurance Policies
Some insurers offer what’s called a “hybrid” policy that combines life insurance with long-term care coverage. With hybrid insurance, money from the policy can be used for long-term care. The insurer pays for care until the money runs out. However, if the policyholder does not need long-term care, the insurance company will pay a death benefit to the beneficiaries after the policyholder dies.
6. Reverse Mortgage
A reverse mortgage loan, like a traditional mortgage, allows homeowners aged 62 or older to borrow money using their home as security for the loan. The loan is paid back when the borrower sells the home, no longer uses it as a primary residence, or dies.
The tax-free loan amount can be used for long-term care or other expenses. However, homeowners who have an existing mortgage or other debt against their home must use the funds to pay off those debts first.
A reverse mortgage can be complicated, which is why homeowners are advised to talk to an expert before taking out the loan.
Planning Ahead
The NIA recommends considering long-term care before it becomes necessary. Planning for the potential need for long-term care allows older adults and their families to familiarize themselves with the services offered in their area and the costs of these services. This proactive approach also enables older adults to make important decisions while they are still capable of doing so, the NIA says.
Source Links:
https://www.nia.nih.gov/health/long-term-care/paying-long-term-care
https://www.forbes.com/advisor/life-insurance/long-term-care-hybrid/
https://www.aaltci.org/long-term-care-insurance/learning-center/ltcfacts-2023.php#2023costs-60
