What do I need to know to best manage the cost of care?

Jon Beyrer, CFP, EA

Caring for a loved one requires time and energy. It also may require medical expertise and the use of medical treatments, facilities or equipment. If the time, energy, and medical necessities of care make doing it yourself difficult or impossible, you will need to get help- and help in this area can be expensive.

Of course, most state and local governments offer programs to help people of limited means get care, but these really should be a last resort. They typically provide a basic level of care. Having the financial resources to pay for care options can make a huge difference in the quality of your loved one’s care.

The first and most important step is to know what resources are available to you. These may include insurance, savings and investments, income sources such as pension benefits or social security, and assets such as a home. Each of these offers advantages and disadvantages for paying for care, and may involve special considerations that you as the caregiver need to consider to make the best use of the available resources.

Insurance is the first resource to consider, and the one that may have the greatest effect on what your options are. Most elderly people in the U.S. are covered by Medicare, the government-run healthcare insurance program. Medicare pays for hospital stays and other medical treatments to a point, and after that you may be on the hook for additional treatments, drugs, or care options. Many retirees have supplemental health care insurance, sometimes referred to as Medi-gap insurance. This private insurance helps pay for costs that Medicare does not cover.

However, Medicare and Medi-gap insurance do not cover the costs of long-term nursing care, home health care, or assisted living care. Medicaid does cover these costs, but only for people with very little assets or income. Private long-term care insurance policies are designed to reimburse costs of long-term care, but these typically do not cover all of the costs, especially for home-care or assisted living care. In addition, long-term care insurance often has restrictions on the type of facility or care it will cover. Insurance coverage, with its requirements, qualifications, and limitations, may drive all the other financial decisions. Knowing what insurance your loved one has, how it works, and what its limitations are is often the most important financial aspect of caring for your loved one.

Income your relative is receiving from pensions or social security is the next resource to consider, followed by savings and investments. In maintaining your relative’s investment portfolio and tapping it as a resource, you may want to consult with a financial advisor and a tax advisor. These professionals can help you navigate the issues of managing and liquidating investments.

Checklist for managing financial resources:

1. Know your relative’s entire financial picture: assets, liabilities, income and expenses, and cash flow. 
2. Can you meet their necessary expenses with the income they are receiving, or do assets need to be liquidated? What are the tax, legal, and financial aspects of maintaining and liquidating your relative’s assets?
3. Be familiar with the terms and restrictions of any insurance policies.
4. Know alternatives you have to pay for their care needs. For example, are there services and programs are available to help meet their needs?

Jon P. Beyrer, EA, CFP® is the Vice President of Financial Planning at Blankinship & Foster, LLC, a Registered Investment Advisor in Solana Beach, California. Mr. Beyrer earned his Master of Science Degree in Financial and Tax Planning from San Diego State University. He is licensed to use the Certified Financial Planner and CFP® marks by the Certified Financial Planner Board of Standards, and is enrolled to practice before the Internal Revenue Service. Beyrer is a member of the Financial Planning Association and currently serves as the association's Public Relations Director. He is also a member of the La Jolla Estate Planning, Trust and Probate Section and the National Association of Personal Financial Advisors.