What are your funding options for long term care? Funding options for long term care are available, but they all require planning. Chris Orestis, CEO of Life Care Funding, wrote this recent article for his blog in the Portland Press Herald.
Long-term care can be an expensive proposition that too few people are prepared for or understand. Unfortunately most people don’t think about their funding options for long term care and how they will pay for care until they are confronted by a serious health situation for themselves or a loved one. The worst time to start planning for long-term care is in the midst of a crisis because the options to pay for care can be complicated and take some time to access.
Also, the costs of long-term care are expensive and rising every year:
• Full time home care can run $5,000-$10,000 every month.
• Residing in an assisted living community can cost $3,500-$5,000 every month.
• Nursing home care costs around $7,000 every month.
Funding Options for Long Term Care
The three primary ways to pay for care are with Medicare, Medicaid, or Private Pay through insurance, savings or assets:
1. Medicare is an “age based” program will cover the first 100 days of rehabilitation care (with review) in a licensed skilled nursing facility upon direct discharge from a hospital.
2. Medicaid is a “means based” program. To qualify, an applicant must meet both standards of medical necessity and be below set asset and income levels which in essence requires that the individual is below the poverty line. Applying for Medicaid can be a challenging process that requires the applicant to submit detailed medical and financial records. Medicaid will “look back” five years at financial records to make sure that assets have not been hidden or transferred to family members below their true market value.
3. Private Pay primarily comes from an individual and/or a family’s savings, assets, and income. It can also come from insurance in the form of long term care insurance or the conversion of a life insurance policy into a long-term care benefit plan. People that are private pay can choose any form and location of care that they want.
Independent and assisted living, as well as most forms of home care, are private pay only. Nursing homes are primarily covered by Medicaid for people who can qualify. Skilled rehabilitation and hospice are primarily covered by Medicare.
It is becoming more competitive to get access to the best long term care providers as 10,000 Baby Boomers turn 65 every day. Statistics show that 70% or more of people over the age of 65 will require long term care services. Today there are 10,000,000 people receiving long term care in the United States. People with the ability to afford private care typically have better access to care providers and preferred locations. Medicaid recipients often have less choice as to where they can go and often will share a room with another person.
Tremendous pressure is being placed on tax-payers to cover Medicare and Medicaid budgets because the demand for long term care services is growing rapidly at the same time costs are rising every year. Courts and the government are doing more to push financial responsibility back on families. For example, the requirements to qualify for Medicaid funded long term care services continue to become more stringent. States have the right to pursue families in probate court to recover funds spent by Medicaid if they discover that assets were in fact available. And filial responsibility laws in some states might eventually hold extended family members legally responsible to cover unpaid long term care bills.
Families need to do all they can today to prepare to fund long term care and protect themselves from both the financial costs and the possibilities of legal liabilities. There are actions that people can start taking today to prepare themselves for future costs, and there are long term care funding tools that people can use to address immediate need for care as well.
More Funding Options for Long Term Care
What are some of today’s options for private pay funding of long term care?
• Veteran’s Aide & Attendance Benefit
• Reverse Mortgage
• Single premium immediate lifetime annuities (SPIA)
• Senior Living Loans
• Long Term Care Insurance
• Convert a life insurance policy into a tax-free Long Term Care Benefit Plan
The key to successfully navigating any long term care situation is to understand the financial options that are available to cover the best and most desired form of care. You need to know the differences between what will be covered by Medicare, Medicaid or Private Pay. You need to know how to qualify for Medicare and Medicaid coverage, and not make the mistake of assuming eligibility is automatic. Paying privately will give you the ability to choose any form of care you want—but this means you need savings, assets, or insurance. Planning and informing yourself as far in advance as possible is best, but there are a number of funding options available (public and private) that can help people address a sudden and immediate need for care.