Paying for Long-term Care

Long-term care includes a broad range of medical and support services for people with a degenerative condition (such as Parkinson’s or stroke) a prolonged illness (such as cancer) or a cognitive disorder (like Alzheimer’s). It involves providing assistance with the activities of daily living and supervision if needed.

The cost of care in a facility depends on the level of care needed, what services are provided, and your geographic location. The average daily cost is $200. Care can cost anywhere from $6,000 to $12,000 per month. Locally, the average cost for a day in a skilled nursing facility is $280 per day. Care in the home is also expensive. A daily visit by an RN might cost $100 per day.

Medicare does not cover most long-term care. It covers up to 100 days per year if you are “making progress.” The national average of approved Medicare days is about 25 per year. Medicare’s premise is that you must show constant improvement in order to qualify – it is only for acute short-term care. Medicare supplement policies do not pay for long-term care, either. After the Medicare paid days, you must find other ways to pay for care.

There are three ways to pay: 1)your savings and income, 2) welfare, and 3) long-term care insurance.

If you can comfortably pay for long-term care from your income and meet any other necessary expenses as well, you really don’t need long-term care insurance. If your Social Security, pension, and investment earnings cover the cost of your care, you are in good shape. Make sure you consider your spouse. If you have to be in a nursing home, will there be enough income to pay for both your care in the nursing home and maintain the standard of living for your spouse remaining in the home?

If you cannot afford care, you will qualify for Medicaid, the government program designed to pay for long-term care for those who do not have the resources to pay themselves.

What if you fall in between (where the vast majority of us are)? What if you have some income and some assets, but the income isn’t enough to keep you? If you have to spend principal, it won’t last very long. If you spend your assets on care, eventually you will qualify for Medicaid. Many people are uncomfortable with this for many reasons. First, if there is a spouse and/or children still living at home, spending down assets until there is qualification for Medicaid may leave the spouse and children at home without enough money. (Yes, there could be small children at home. Think of Christopher Reeves.) Second, many people feel insecure or uncomfortable relying on a government program to pay for their care and would like to make sure that there is adequate provision for their care without depending on a welfare program. Third, with Medicaid you don’t have a choice of places to go to since private institutions do not have to accept you as a patient. Fourth, many people would like to be able to pass the assets they have managed to accumulate over their life-time of hard work to their children.

In my opinion, the best solution for persons in the “fall in between” category is to purchase long-term care insurance. Long-term care insurance will pay a daily benefit to be applied to the cost of long-term care if and when you need it. There is an underwriting process that considers your age and medical condition. You can’t wait until you are sick to buy this insurance.

There is a very broad range of policies and coverages available. Find an independent broker you’re comfortable with, and use that broker to help you decide. In general, pre-existing conditions are not covered. Treatment for drug and alcohol addiction is not covered. Mental disorders generally are not covered (although you should make sure that Alzheimer’s and dementia are covered). Nationally, 92% of nursing home patients (of that 92%, 70% are women) spend less than five years in a nursing home. In Pennsylvania, the average utilization of service is 3-1/2 years. Some advisors say that 3 years of coverage is adequate. Guaranteed renewable policies are best; they can’t be cancelled except for non-payment of premium.

What does long-term care insurance cost? It depends and varies widely depending on the level of benefit, benefit period, your age and health, etc. Here is an example provided by Stephen F. Schlissel, CFP: For a husband and wife, both age 60, $150 per day ($4,500 per month), 3 year benefit, 90 day elimination, standard health rating, 3% annual compounding increase in benefit; the annual premium for both together is $2,384.

Since July 2007, Pennsylvania has a Long Term Care Partnership Program. The Long-Term Care Partnership encourages Pennsylvanians to purchase long-term care insurance by providing asset coverage equal to the benefits paid by the policy. This means dollar-for-dollar asset protection. For example, a person whose qualifying policy paid for $100,000 of care would be entitled to keep $100,000 in assets if he or she needs to apply for Medical Assistance in the future.