No one enjoys thinking about the prospect of one day requiring long-term care, but the reality is that as the average lifespan stretches and Americans are living longer, the need for long-term care is increasingly becoming an issue for the aging. Adult children wishing to assist their aging parents often wonder where to go for this advice. Even gathering the information ahead of an emergency situation can be a bewildering process.
About 70 percent of Americans 65 and older will require long-term care of some kind, according to a study by the U.S. Department of Health and Human Services. Long-term care is not one size fits all. Depending on the level of care and, in some cases, the preferences of the individual, there are many types of care to explore including: skilled nursing, assisted living or in-home care.
Just to give you an idea of the typical cost of these categories of care, here are some 2015 national averages to consider:
- Nursing home (semi-private room): $80,300 per year
- Nursing home (private room): $91,250 per year
- Assisted living (one bedroom): $43,200 per year
- Home health aide: $20 per hour
(Bear in mind that in large cities, such as New York or Boston, the cost of nursing home care will usually be closer to $100,000 annually.)
As demonstrated by these numbers, an individual's entire life savings can easily be wiped out in a relatively short time. Unfortunately, the options for defraying the cost of long-term care are few:
Insurance and Medicare: Insurance companies cover standard health care and do not cover the need for long-term care. One cannot rely on Medicare to step in and foot the bill of long term care, either. Medicare, in most instances, will only cover the first 100 days of an individual's rehab stay at a nursing home. Even then, only the first 20 days will be fully covered, followed by 80 days of partial payments along with a co-pay.
Long-term care insurance and Medicaid: Generally speaking, those not eligible for Medicaid are encouraged to consider long-term care insurance at the age of 50, according to Jeffrey Condit, Senior Vice President and AARP Relationship Leader for Genworth Financial. There are several reasons for this, the most obvious being the low cost of premiums when an individual is middle aged and enjoying good health.
The average cost of long-term care insurance for a healthy 55 year old is about $2,550 per year, but it can range from approximately $1,325 per year to $4,935 per year, according to the American Association for Long-Term Care Insurance. It goes without saying that this cost will increase exponentially as the insured individual ages, and also does not include any other insurance premiums that a person must pay for regular health care. This leaves long-term care out of reach for many middle income Americans. Contrary to popular misconception, Medicaid is not designated only for the poor. Through Medicaid, many middle income Americans can gain access to long-term care choices that would otherwise be unaffordable to them.
With the proper knowledge and planning, many individuals can be eligible, and it can be a good idea to reach out to a competent consultant for guidance.
When is it a good time to begin thinking about applying for Medicaid?
Ideally, one should begin thinking about the application process five years in advance of anticipated long-term care. This will allow for asset preservation prior to the five-year ‘look back'. This is the term Medicaid uses to describe the 60 month period where they will look to uncover any transfers of assets for less than fair market value, and will impose a penalty period of ineligibility based on those gifted monies.
It is important to note that individuals with certain illnesses may need to plan earlier than others in case they need long-term care. Some of the illnesses that may result in an extended nursing home stay include dementia, diabetes, renal failure, some types of Parkinson's and some forms of cancer.
Once the prospect of nursing home care is imminent, for a single person it is generally best to begin thinking about the Medicaid application when ones assets are down to $100,000. A married couple should begin the process no later than when their assets are down to $240,000.
This amount gives the Medicaid applicant sufficient time to gather necessary documents and to spend down some assets on allowable expenses such as a pre-paid funerals and other expenditures. This will also allow for a smooth application process and greater peace of mind for the family. It is a subject many families find difficult to discuss, but knowing that plans have been made and they are compliant with personal wishes brings comfort.
Being properly informed and educated on Medicaid eligibility guidelines is really all it takes to ensure that the cost of your care is addressed and does not fall on your loved ones. Waiting until it is needed or procrastinating on this decision can complicate the issue even further. Using planning guides and discussing with family and close friends can assist in the decision-making process.