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April 2008
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Gain Peace Of Mind With Long-Term Care Planning
Long-term care (LTC) refers to a wide range of health, rehabilitation, personal and social services - whether offered in a nursing home, assisted living/residential care facility (ALF), or at home - for those who need assistance with daily living due to illness or disability. If long-term care enters the picture, your world could change dramatically, affecting not only your quality of life, but your financial situation as well. According to the American Association of Retired Persons (AARP), the annual cost of a nursing home averages around $50,000 per year, with specific costs varying in different parts of the country (Starting the Nursing Home Search, AARP, 2004). Home health care can also cost thousands of dollars per year.
Whether you are single or married, planning for long-term care now can help put you in control and allow you the opportunity to make the choices that are right for you and your loved ones. However, as you prepare for the future it's important to understand what you can - and cannot expect when it comes to paying for long-term care:
Medicare does not cover longterm care. Medicare covers some nursing home costs, but only for “skilled care,” which is medically necessary care that may be required for a limited period of time after a patient is released from a hospital. In certain instances, Medicare may also pay for “skilled care” given at home.
Medicaid covers long-term care, with strict eligibility requirements. In the AARP Public Policy Institute report, Medicaid and Long-Term Services and Supports for Older People, roughly one third of Medicaid spending goes toward funding long-term care (AARP, 2005). Medicaid also covers a limited amount of services offered at home and in the community, for those who might otherwise require nursing home care.
Unfortunately, without advance planning you will generally be required to substantially reduce or even nearly exhaust all your financial resources before meeting Medicaid's stringent eligibility criteria.
Those ineligible for Medicaid generally use personal assets. Unless you are covered by long-term care insurance, you will most likely have to rely on your personal funds before becoming eligible for Medicaid. With today's high cost of long-term care you could see your savings vanish quickly.
Long-term care insurance can help pay for long-term care. Private long-term care insurance can be used to help cover the cost of care. You may want to consider having a policy benefit period that is at least as long as Medicaid's “look back” period (the time during which the transfer of assets will result in the disqualification for Medicaid), so that you may be able to protect your assets from being used to cover the cost of longterm care.
Covering all bases
It is important to realize that longterm care planning is important not only for your own psychological and financial well-being, but also for the peace of mind of family members or caregivers who may need to provide emotional and/or financial assistance in future years. Consider reviewing your financial situation with a qualified professional who has experience in long-term care issues.
(Matt V. Fiamengo is a qualified member of Million Dollar Roundtable as he has helped hundreds of seniors navigate their financial affairs. He is a Chartered Life Underwriter and a Registered Health Underwriter. For an interview or details on this issue, phone him at (775) 851- 8838 or e-mail: MattProClu@earthlink.net)