Long Term Care Planning

The odds of a person needing long-term care when they are older depends upon a number of factors, some reports say that the odds of someone needing nursing home care are over 50% for those 65 or older. A 2007 USA Today article said that 7.4% of Americans aged 75 and older are in nursing homes in 2006.  Long-term care assistance comes into play when people are unable to care for themselves because of cognitive impairments (e.g., Alzheimers) or physical impairments. The key determinant for physical impairments is the ability to perform the Activities of Daily Living (ADL) to a specified level of proficiency. The Six ADLs are: 1. Bathing; 2. Eating; 3. Toileting; 4. Transporting; 5. Incontinence; and 6. Dressing.

There are several types of care: Skilled Care – daily 24 hour nursing care, Intermediate Care – occasional nursing care, and Custodial Care – providing assistance with the ADLs.

Care can be provided in the Home (Home Health Care) by a friend, relative or professional, or at a Nursing Home, Adult Day Care, or Assisted Living facility. LTC assistance can also entail Hospice care provided in someone’s home or in a hospice facility. Many nursing homes today provide several levels of care within one facility. People with diminishing health and spouses who may require different levels of care find these multi-level care facilities to be a good fit for their changing needs. Many nursing homes today provide nice home environments that are not institutional, making the change from independent living much more comfortable.

The average cost for LTC today for a private room in a nursing home is over $6,000 per month, according to AARP. The average stay can easily be 2–3 years, at a cost of more than $225,000. What are the options to pay this? Private major medical health insurance (group or individual) provides little to no benefits. Medicare health insurance for people over 65, or for anyone with certain disabilities, provides for care in a skilled nursing facility for 100 days following a 3-day stay in a hospital. After 100 days there is no coverage. Medicaid welfare-type benefit for those with a very low-income or little to no assets. Veteran’s Affairs provides for service-related disabilities or for certain eligible veterans. These are not viable options for a lot of people, therefore Long Term Care insurance is often worthy of consideration.

Individual Long-Term Care Insurance policies are available to provide various levels of care up to benefit limits. Group Long-Term Care Insurance can be provided through employers, funded with group rates and through payroll deduction. Qualified LTC Insurance may provide tax advantages on the premium and tax-free benefits. Some states offer “Partnership Policies” that shelter some of your assets should you require some assistance from Medicaid. Obtain several quotes from different insurance companies, and evaluate their history of rate increases, benefits, features, and company ratings (the agent should be able to provide this information); purchase only what you can afford. Consider various riders, including Cost of Living Adjustment (COLA), which increases your benefit each year prior to claiming benefits. Some life and annuity insurance policies also have various riders on life insurance policies may provide funds for long-term care.

Without insurance, savings and investments until depleted are used to pay the costs, then Medicaid pays. Home equity can fund LTC through sale of the home or by the use of a Reverse Mortgage. Financial planning should take into consideration one’s potential need for long-term care assistance. 

Many people ask about Medicaid Planning. Government (e.g., Medicaid) has limited resources to meet the growing demand of our aging population. Qualification requires that individuals spend down their assets to $1,500 and have limited amounts of income. Married couples have different limits; they should seek qualified counsel if either spouse is applying for Medicaid-paid long-term care assistance. Change in the law makes it much more difficult to transfer assets in order to qualify for Medicaid.

As with all planning, seek the assistance of qualified professional trusted advisors prior to making decisions and implementing your financial plans.

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