The greatest risk facing nearly all seniors is the need for long-term care services.
Long-term care services generally are provided for those who cannot perform the activities of daily living without assistance. This includes such things as bathing, toileting, dressing, ambulating, transferring, dealing with incontinence or eating. It can also include assistance with other services provided to the disabled person such as shopping, cooking meals, providing transportation, paying bills, managing medications, answering the phone, performing household chores, providing companionship, providing supervision and so on.
If you are an adult reading this blog, you have about a 70% chance of eventually needing some sort of long-term care, ranging from occasional home visits by nurse or other caregiver to residing in an assisted living facility (ALF) and possibly residing in a skilled nursing facility (SNF or nursing home) .
Nursing Home Care is Expensive
Nursing home care is extremely expensive and can wipe out the life savings of most people. Here are examples of the average monthly cost of a private room in a nursing home from across the country as of this writing (2019):
- Anchorage, AK: $30,751 (no, that is not a typo)
- Phoenix, AZ: $9,338
- San Francisco, CA: $12,927
- Denver, CO: $9,779
- Medford, OR: $8,973
- Crossville, TN: $7,000
The average stay in a nursing home is about 3 years (36 months). Multiplying the monthly figures above by 36 months results in the following total cost of care (does not including medical and incidental expenses).
- Anchorage, AK: $1,107,056 (no, that is not a typo)
- Phoenix, AZ: $336,168
- San Francisco, CA: $465,372
- Denver, CO: $352,044
- Medford, OR: $323,028
- Crossville, TN: $252,000
Your individual results may vary, of course. Some nursing home stays are shorter. Some are much longer. Also, remember, if you are married, these figures are per person, so multiply them by two to determine how much you need to save for nursing home expenses for both of you.
How to Pay for Nursing Home Care
There are only three ways to pay for nursing home care:
One way to pay for nursing home care is, of course, to write a check every month. If you are fortunate to have enough money in the bank or in liquid savings (stocks, bonds) to pay for nursing home care, then you have done a good job of planning ahead.
There is such a thing as long term care (LTC) insurance, which is available precisely to pay for nursing home expenses. Some policies will also pay for in-home care. In this writer's opinion and experience, even though it seems expensive, it actually isn't when you consider the high odds of needing it.
The best time to purchase LTC insurance is when you are healthy, the same as for life insurance. In fact, many LTC insurance policies these days are hybrid life/LTC policies. Policy terms and conditions and provisions vary widely, as does the pricing. It helps to shop around. Contact your financial advisor or life insurance agent for assistance with this. If you need a referral, feel free to give us a call.
If you are under age 60 and fairly healthy, this might be the best option for you. It might not be your sole strategy, however. Some people plan to pay for nursing home expenses with a combination of savings and LTC insurance. Your financial advisor can help you with this kind of planning.
VA and Medicaid
Medicaid is a federal-state government benefit program that pays for long term care for elderly and disabled individuals who qualify. It is needs-based so not everyone qualifies. The eligibility rules are complicated, but in a nutshell you will not qualify if you have over $2,000 in savings and other assets (not counting your house, car or prepaid funeral plan). It is there for you, however, after you have paid privately for a time and run out of money.
If you are married, there are also limits on how much your spouse can have in savings and other assets in order for you to qualify. If your spouse's assets are over the limit, they must be spent on your care until both of your are under the respective asset limits.
When you die, the assets that you were allowed to keep while you were in the nursing home are then subject to being taken by the state to reimburse it for the sums spent on your care. The rules on this are also very complicated and vary by state, but you can see that it is possible for nursing home expenses to completely eliminate any inheritance for your children.
The Veterans Administration (VA) also will pay for long-term care expenses for eligible veterans. This program is also needs-based, but the benefit amounts are much lower than Medicaid benefits and usually only are sufficient to pay for limited in-home care.
May people do not plan ahead because they assume that Medicare will pay for their nursing home expenses. This is a grave misconception. Medicare only pays for inpatient skilled nursing care for a maximum of 100 days. The first 20 days are covered 100% and the remaining 80 days require a co-insurance payment. In order to qualify you must be admitted an an inpatient for three consecutive midnights, a doctor must have certified that you require skilled nursing care, you must have been admitted within 30 days after you were discharged from the hospital, and you must have days remaining in your 100-day benefit period.
By now you have probably figured out that a failure to plan ahead could result in your estate being completely wiped out by nursing home expenses, leaving nothing for your children to inherit. Take heart in knowing, however, that it is possible, with sufficient advance planning, to achieve Medicaid eligibility AND leave an inheritance for your children. This is called Medicaid pre-planning, and it is what elder law attorneys do for their clients day in and day out. We are well-versed in the rules and regulations and can help you develop and implement such a strategy. If this is something you would like to explore, give us a call today.