09 May Paying for Long-Term Care
The U.S. Department of Health and Human Services estimates that about half (52%) of Americans turning 65 today will require long-term care (LTC) and support services. These options include: independent senior communities; assisted living; continuing care retirement communities; board and care homes; skilled (nursing) care facilities; and home health care. Furthermore, according to the Genworth 2017 Cost of Care Survey, the price for all types of long-term care is increasing.
For example, the average monthly cost of an assisted living facility is $3,750 per month–up 3.36% from 2016. Hiring a home health aide will now cost $21.50 an hour–an increase of over 6% from the previous year. A semi-private room in a nursing care facility averages $7,000/month (up 4.44%) while a private room will cost over $8,000/month (up 5.50%).
How to Pay for Long-Term Care
Many older adults are unaware of the costs of long-term care. They also mistakenly assume their health insurance will cover the cost. However, private health insurance, employer/group sponsored insurance, Medicare, and Medicare supplement plans do not pay for LTC. Therefore, the responsibility to pay for the cost falls on you.
Long-term Care Insurance. Unlike traditional health insurance, a long-term care insurance policy specifically covers the cost of living in a variety of care facilities (or in-home care) if you meet certain requirements. Most policies will only start to pay benefits when you can no longer do at least two out of six “activities of daily living” (ADL’s). These include bathing, dressing, eating, getting on/off toilet, continence, and transferring from a bed/chair. In addition, you usually pay for the first 30, 60, or 90 days of a stay before the policy benefits start. The best time to purchase a long-term care policy is in your 40s and 50s before your chance of developing a chronic debilitating medical condition increases. There are a number of pre-existing conditions that will disqualify you from purchasing LTC insurance. Costs vary greatly so be sure to call several different insurers for rate quotes. Due to the increasing cost of premiums, sales of LTC policies have greatly declined over the past few years.
Personal Savings and Investments. Money from the sale of stock investments, personal savings, money in 401(k)/IRAs, monthly employer pension, Veterans benefits, or using the proceeds from the sale of your home are all good sources to cover the cost of long-term care. How much money you will need which will depend on how long you will live in LTC. Reports say the average stay at an assisted living facility is 28 months. However, many seniors move two to three times to different care options as their needs change. You should plan to have enough funds to cover four to five years of long-term care.
Medicaid. For those who meet certain eligibility requirements (financial and health condition), Medicaid may cover the cost of long-term care in an approved facility. The program will only cover costs once you have spent the majority of your own money to pay for LTC. Medicaid is administered by each state so it is important to talk to a representative in your state’s Medicaid administration office to determine your eligibility.
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