The baby-boomers are aging and many will need long term care. The question about how to finance long term care is on people??s minds. We invited David Bethel; partner in the Financial Planners of Missouri to discuss techniques is financing long term care.
Question: What is Long Term Care?
Answer: What isn??t long??term care? It is not recovery from an illness or injury. It implies that the condition is not improving and that it is something that one will need to live with the rest of their life. Long term care is services and support that you need to meet health or personal care needs over a long period of time. These are often called activities of daily living.
These activities of daily living include: dressing, transferring, toileting, bathing, and eating. You may need the assistance because of a physical impairment or a cognitive impairment.
Question: Who is likely to need it?
Answer: Most everyone that you know has a high likelihood of needing some form of long-term care. 70% of people turning 65 are likely to need care for an average of 3 years of care. For women that the average is 3.7 years, and for men the average is 2.2 years. (From: www.longtermcare.gov)
This need can be met in one??s home, in assisted living facility or in a nursing home. Unfortunately this is a typical progression.
Question: Who will provide the care?
Answer: Many individuals are ill prepared for the day they need long term care.
Often the first level of care is provided by a by a family member or friend in one??s own home. When the level of care exceeds what a volunteer can provide, you may bring in a nurse or home health aide to supplement the care. The next level of service may be adult day care, or a residential assisted living facility. Finally, a person may find they need a nursing home to receive the level of care needed.
Question: Who pays for the care?
Answer: As a consumer, you are ultimately responsible for paying for your own care. Sadly, many hope that they will never need long-term care and thus do not plan to for the resources needed to pay the cost. Since so many will ultimately need long-term care, some will find they are unprepared and will be shocked by the expense.
What are the alternatives? Not any good ones. If they have health insurance, they will learn that it does not cover long-term care costs. If they are on Medicare they will learn that it does not cover long-term care. If they are a veteran, they may qualify for a veteran??s benefit, although the income and asset guidelines are restrictive.
So after spending their assets down to under $1,000, they will likely become eligible for Medicaid, which does pay for long-term care.
Many families have utilized strategies to give assets away in order to qualify for Medicaid or Veteran benefits, but at this time it has become increasingly difficult to accomplish. You are not required to sell your home to become eligible for Medicaid but the State will have a claim against your home after you pass.
Question: How much does long-term care cost?
Answer: It is impossible to calculate the toll of providing this care by family members and friends as volunteers. (2012 figures for the State of Missouri)
$21/hour for home health aide
$67/day adult day care
$2,288 assisted care facility
$4,403/month in a semi-private room in a nursing home
Question: What should you consider if you purchase long-term care insurance?
Answer: I think when someone needs long-term care; it??s as if that household is operating two homes; one for the healthy spouse and one for the spouse in need of care. If you have very little income or assets, Medicaid was a program that was designed to help if you need long-term care. If you have good income and assets to operate one home, but not two, you need long-term care insurance. If you have enough income and assets to operate two homes, you may be self-insured.
If you are a candidate for long-term care insurance, you need to understand the cost will increase:
As you wait and grow older before applying.
As you increase the daily/monthly amount of coverage desired.
As you increase the length of coverage desired.
There are two types of insurance.
One, works like auto insurance, you pay a premium and don??t get any money back unless you need long-term care.
The second is called a linked benefit and typically involves life insurance, where you can access part of the death benefit while you are alive if you need long-term care.
Financial Planners of Missouri
110 S. Franklin St.
Kirksville, MO. 63501