As we get older, each of us must begin to contemplate the possibility of needing long term care (LTC) at home, in assisted living, in a nursing home, or some other setting. The options for how to pay for that care are often confusing and can involve difficult discussions. There are three basic options for paying for the costs of LTC: (1) self-pay, (2) LTC Insurance, and (3) government assistance.
Self-pay is self-explanatory – you build up a large enough reserve of assets and pay for the care yourself. This is often the most difficult option, in that we don't know how much in assets will be needed. The kind of care that will be needed, the cost of that care, and how long that care will be needed will all impact the total overall cost of care. Some people have saved up hundreds of thousands of dollars on the “self-pay” option, only to find that after a few years, all of their savings were spent. They then are forced to move to the government assistance option.
Long Term Care Insurance can be a very good option and can cover much, if not all, of the cost. As with all insurance, LTC Insurance shifts the burden and risk of the cost of care to an insurance company, in exchange for an insurance premium. It's possible to purchase an insurance policy that will provide a daily benefit to help pay the cost of care. There are a lot of options in these policies, such as the amount of the daily benefit, the length of the policy period (how many years the policy will provide benefits), or whether there is an adjustment for inflation in the daily benefit paid. All of these variables will affect the amount of the premium for the LTC Insurance. If you're interested in learning more about your LTC Insurance options, we recommend that you speak with a licensed insurance agent who specializes in LTC Insurance.
Government health assistance options are the most confusing of all because there are two very similar sounding programs, Medicare and Medicaid, which both provide assistance with healthcare costs, but these two programs provide assistance in two very different ways. Medicare is the program that is much closer to a typical health insurance plan. You pay a premium of some kind and Medicare covers some of the costs of doctor's visits, medications, surgeries, hospital stays, etc. Medicare also covers a minimal stay at a LTC facility, but it will only cover at most 100 days, and is only guaranteed up to 20 days. Medicaid, on the other hand, is not insurance; it is a wide ranging program that covers everything from food stamps to extended LTC stays. With Medicaid there are no premiums to pay, but an individual must qualify for benefits based on a set of income and asset requirements. See our article on Medicaid Qualification.
Medicaid will cover a portion of the cost of the stay at a LTC facility indefinitely once an individual has qualified for the program. The basic rule is that Medicaid will cover the cost of the care and medications above the amount of an individual's income. For example, assume that Mary was qualified for Medicaid and was staying in a LTC facility. If Mary had income of $1,500 per month and had a monthly LTC bill of $6,000 per month, Mary would pay approximately $1,460 for her care (she's allowed to keep $40 of her income), and Medicaid would pay the rest. In this way Mary is able to receive the care she needs without having to have insurance in advance or come up with the entire $6,000 per month.
In this process of deciding how to pay for LTC costs, many individuals either don't plan, plan late, or choose only one of the options available. While it is almost never too late to do some planning, by being proactive and planning early, you have the most options and can make the best plan for yourself and your family. The sooner the planning is done, the better your options and results will be. In addition, consulting with a competent advisor that can assist you in creating a comprehensive plan can help to avoid the pitfalls of any of the three options above.
If you have any questions about how to plan for paying for the costs of long term care, call our office and schedule an appointment for a free half-hour consultation with one of our elder law attorneys. Call us at 419-872-7670 to make your appointment today.