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Who Pays For Long Term Care?

Long Term CareAs I am rapidly approaching age 40, my though process on life and health has certainly changed from a couple of decades ago. While I still feel 25 on most days, you can’t argue with the calendar. Like it or not, I’m middle aged. With that label comes many questions about how to prepare for the coming years. Since I am a planner and don’t want my loved ones to have to make decisions for me, I am the type that has a will, life insurance, and an advanced directive that tells my family what I want to happen if I end up on life support. One question I haven’t really pondered is about the need for long term care insurance. We also have parents who are in their mid 60’s, so even if we aren’t ready to think about ourselves in a nursing home, it is a very real possibility for them. Should we be considering long term care insurance?

What is Long Term Care?

By long term care, I am talking about care needed if you can no longer feed and/or dress yourself of if you need help with basic personal hygeine and care. This can be from a caregiver who comes to your home, assisted living, or staying in a skilled nursing home. Genworth has compiled a cost of care map to see long term care costs by state. In Colorado, current annual costs for those services vary from $38,000 for a home health aide up to $78,000 for a private room in a nursing home.

Who Pays for Long Term Care?

Contrary to popular believe, your health insurance or Medicare does not pay for nursing home care, other than for short rehab stays of 100 days or less when you leave the hospital after an illness or injury.

There are basically four ways to pay for long term care.

 Friends and Family– If you have friends and family who can provide care, you might be able to avoid a nursing home. However, this can come at a great personal and financial cost to your loved ones. I know my Mom and her siblings were under great stress when trying to care for my elderly grandmother in the last few years of her life. Taking care of an infirm relative is like having a 150 pound baby with none of the joys that come with newborns.

Medicaid-If you have few assets and little money, a government sponsored plan could provide long term care coverage. You do have limited choice in facilities or providers, and there is no guarantee Medicaid will be viable by the time younger people might need it.

Self Insure-If you have sufficient assets or investments, you could self insure against long term care costs. Although only about 5% of people need the highest cost long term care for several years, the average lifetime cost for this group according to a 2005 study is $250,000. If you don’t have this much money or want to leave an inheritance to your children, self insurance could fall short.

Long Term Care Insurance– Special insurance policies can cover much of the cost of a nursing home or home health aide, but they are expensive. The earlier you sign up for a plan, the cheaper the cost, but who wants to buy long term care insurance in their 30’s? If you wait too long, you could also be declined due to health reasons. The most common age to get long term care insurance is the mid 50’s. You are less likely to get declined, and premiums aren’t as expensive as waiting until the next decade.

You might also use a combination of some of these methods. Maybe get a less comprehensive long term care policy and supplement with retirement savings? If you are married and like to play the odds, you might consider insuring the husband only. Men, on average, don’t live as long, so care policies often cost less. Assets could be saved for the surviving wife and care she might need.

Regardless, I don’t want my daughter to have to decide what to do with me if I can’t take care of myself. Likewise, I don’t want to decide for my parents. My Mom and Dad did purchase a long term care policy in their late 50’s. My in-laws are Medicaid eligible. No one wants to think about needing a nursing home, but if you make a written plan that others can access, that’s one unpleasant deed that can be taken off the table. It might help you sleep better at night as well.

Have you had loved ones without a long term plan to deal with aging? Would you purchase long term care insurance? If so, when?

 

Image: Freedigitalphotos.net/sakhorn38

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.

34 comments

  1. I truly agree taking care an old person is not easy at all! One time my mom asked me “what if she will get old, will I take good care of her?” And then suddenly my daughter answered that nothing to worry because she swears that she will be the one who will take good care of my mom. 🙂

  2. I don’t think anyone wants to think about long-term care planning, because it means you have to admit you are getting old! This is easier for some than others. I think having long-term care insurance makes sense, but I haven’t really read or looked into it besides this post. Definitely something to think about, especially if you have aging parents or other relatives.

    • I think you at least need to discuss it with your parents while they are fairly young and don’t have any mental issues. My Mom has always made their plans clear, but I have no idea what my inlaws want. They don’t really talk about personal things with us at all.

  3. From my experience, long-term care insurance is extremely expensive unless you buy it very early. I don’t think I would buy it unless I had some reason to think that I would need it. It’s something to think about, though. In my area, a nursing home can cost 4K-5K per month and that can eat through your assets very quickly.

  4. Men are less expensive to insure for LTC for a reason. Visit any nursing home and you will see that the population is overwhelmingly female. When a man becomes that ill, he often has his wife care for him. Women often don’t have that luxury as they often outlive their husbands.

    • That was a very prominent fact in the research I did for this post. Many wives often sacrifice their own health trying to take care of an ailing husband. I guess the incidence of the woman having a huge health event, like a heart attack, is pretty great after taking care of someone long term. That recently happened to my aunt. She took care of my uncle for many years and when he passed, she had a stroke within 2 months.

  5. Like Holly, my experience has been that LTC is very expensive. I think a big key is planning for it and being mindful of the probable need for it. We have a parent who is likely going to be in desperate need of it and has not done the appropriate planning which likely means their care will fall to us. Seeing that has really cemented for me that I do not want to put our kids through that when the time comes.

  6. This is such an important area to discuss because people don’t like to talk about LTC because it’s “expensive.” Guess what? Insurances that are expensive cost a ton for a reason….because the insurance company thinks it’s going to be hard to turn a profit (IE: they think it’s going to happen to YOU!). Statistically the chance of you using these policies is huge. Unfortunately, the only time to make a great decision about it is when you’re young (maybe 50) and healthy.

    • Ugh, another thing to look forward to. Would you think it better to try and put a lot of money into something like a HSA account to try to self insure or go ahead with buying a LTC policy?

  7. For some reason I don’t think 40 is middle-age. I’d say somewhere around 50 (until I turn 50 and say it’s 60). 🙂 I still need to look into getting short tern disability though someone. I have nothing to protect me and nothing to fall back on if for some reason I can’t work.

  8. My grandfather had to be put in long term care due to his ailing health (handicapped and lost a lot of control of swallowing) so he was put in a place that until my grandmother could pay down her savings, she was paying $14,000 a month. Medicaid took over after she spent down her money (they limit what you can spend it down on obviously), but it was 9 months of payments! Now my grandmother is in an assisted living facility herself but sold the house to cover the costs (not as expensive since she’s still mobile and has no eating problems). There’s enough money to pay the costs that by the time she runs out, she will need to be in care anyways as she’s already 92 and Medicaid will take over.

    Like you said though, you can’t count on Medicaid being there when we’re at that point in our lives!

  9. I was reading an article the other day that said 7 out of 10 people over the age of 65 will need a form of long term care. Those numbers are big and they are not in your favor. Long-term care is expensive, but so it LTC insurance. Sometimes you can’t even bet it if you wait too late or have a medical condition. These are things to think about.

    • I hate thinking about it, but I have and hopefully we will have a good plan in place when the time comes. I am hoping to have quite a bit of money in our HSA by the time we get really old and hopefully that will help us with health care expenses.

  10. Many older people can structure their assets to qualify for Medicaid if they can’t afford LTC insurance. Speaking with an attorney who specializes in elder law can give you a good idea of your options, but this kind of estate planning ideally should happen years before the person might need LTC — around 65 years old is a good time. The National Association of Elder Law Attorneys (NAELA) is a good place to start the search if you don’t have a recommendation.

    • I think it should be required that you have a plan for end of life/long term care when you sign up for Medicare. It would make it much easier on everyone and you could make sure your wished were known. Thanks for the reference. That is very helpful.

  11. I don’t even want to think about long term care. I never want to end in any of those kind of places because people just give up on life when they end up in nursing homes. It’s depressing.

    • Many of them are, but I’ve seen a few that had good staff and weren’t terrible. I do think it would be awful for a stranger to have to bathe me and take me to the bathroom. I would hope to avoid it at all costs. I want to live a long life, but only if I can take care of myself and am in my right mind.

  12. I recently found out my parents signed up for long-term care insurance. Breaks my heart a little bit, but I know they wanted to ensure they’d never be a financial burden on me or my sister. I do think my sister and I would handle care for them (assuming we’re qualified to), but the financial situation could be difficult.

    • I think it’s not as hard taking care of a parent when they can get around and help with taking care of themselves. My Mom’s Mom and my Dad’s Dad both had to live with my parents for a little while, and it was not a great experience for anyone. My Grandpa was a very big man and it was really hard for my 5′ mother to help him get around. He also got pretty mean toward the end and that was hard for everyone. My Grandma had pretty bad dementia, so she had to have 24 hour care and did not sleep very well. It really put a strain on my Mom and her siblings.

  13. I never knew that medicare wouldn’t pay for long term care! My mom is on permanent disability so I will need to start looking in to how nursing care will work for her as she grows older. That or I will need to start saving for when that time comes.

  14. I watched my mother use up much of her savings when she went into long term care. She lived to nearly 99 years old. Lon Term Care is expensive and my wife and I took out insurance for ourselves.

    • I would hate to get to that age and see everything I’d worked for go to the nursing home. My parents saw some of that when my Grandpa eventually had to go into a nursing home. I think that’s why they were pretty motivated to buy LTC insurance.

  15. People these days are given variety of options to cover their long term care expenses. Those who are fortunate enough to have the budget can simply opt to shoulder everything using their assets. But how about those who have limited budget? That’s where long term care policy comes in the picture. Long term care insurance can pay for skilled care and non-custodial care while protecting your assets. You don’t have to worry about your finances in the future because this coverage will handle everything from home health care to paying for long term care facilities. You also have the option to seek the help of government programs like Medicaid but you need to remember that it has limitations and you need to be eligible first before you can receive benefits. Other alternatives emerged in the ltci industry like combination products or hybrid products, annuities and more, which you can freely check out.

  16. My mother-in-law took care of her mom for a LONG time and it was really hard. I don’t honestly know about a lot of the details of LTC insurance, and it seems like the policies are always changing as insurance companies try to figure it out as well. It seems like with people living longer and longer, this is an area that we have to figure out sooner rather than later. Yeah it sucks to pay the premiums, but wouldn’t it be worse to either go without care or put the burden on family members?

    • I think that’s why so many people stick their heads in the sand and don’t deal with it. I don’t really like any of the options, but I do hope to have a plan in place before I get too old to know what’s going on.

  17. Long term insurance is getting more and more expensive, but it’s probably important to have. I mean nursing homes are very expensive and it would be very difficult to self-insure, plus it is difficult to rely solely on family and friends. It seems more and more people are looking into learning more about structuring your assets so you can qualify for Medicaid as that appears like what many people will have to rely on.

    • Being on Medicaid scares me. I see how little they pay for services, and I can’t imagine how much nursing home care gets discounted. I would think you’d get minimal service at best.

  18. Hopefully my parents will look into getting some long-term care insurance in the next couple of years. I’ll need to make sure to send them a few articles 🙂 I’ll do my best to take care of them, but sometimes you need expensive care unfortunately.

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