Kerry Peabody, LTC Insurance Specialist
So, we’ve talked about how expensive long term care can be. It’s not cheap. How do people pay for it? Basically, there are three ways to do this: Your money, government money, or an insurance company’s money.
The first and most common approach is using your own money, or “self-insuring.” If you consciously choose to “self-insure,” or if you simply don’t do anything and just wait and see what happens, you’re accepting the risk that your money will be enough. This is a perfectly acceptable strategy, assuming, of course, that you understand what you’re signing on for. As we’ve seen, long term care can be hugely expensive, and if your financial resources aren’t significant, you’re risking your ability to survive, financially.
Remember Dr. Spock? He sold 50 million books in his lifetime, but at the end of his life, his family was discussing whether or not to put him in a nursing home, because his home care was too expensive. His publisher actually offered to help pay the bills. Dr. Spock was pummeled by long term care costs. Do you have several hundred thousand dollars to set aside just as your long term care fund? If not, self-insuring may not be the best option.
The next option is government money, in the form of Medicare & Medicaid. I could write for pages and pages about each of these programs, and still not cover them adequately. Let me summarize each of them briefly:
Medicare – this is health insurance. As you’ve worked over the past decades, you’ve been paying into the Medicare insurance program to cover some of this. There are two main parts to Medicare – Part A & Part B.
Part A is your hospital insurance, and you’ve already paid for it. It covers hospital stays, etc. Medicare Part A will pay for a very limited amount of care in a Skilled Nursing Facility (SNF), but only under very strict conditions. These are:
1) You must have a qualifying, 3-night hospital stay.
2) You must be transferred to the skilled nursing facility within 30 days of this hospital stay for the same condition.
3) You must need skilled care – rehab care, in most cases.
If you meet all of these triggers, Medicare will pay all costs in a skilled nursing facility for the first 20 days. From day 21-100, you would be responsible for the skilled nursing facility deductible, which is roughly $140 per day. After 100 days, Medicare pays nothing. But, here’s the tricky part – if you stop needing skilled care, Medicare stops paying. On average, Medicare-eligible skilled nursing facility stays last just 26-28 days. Unfortunately, this is often when the family member gets the phone call that goes “Oh, by the way, Alice, Medicare stops paying today. Will you be taking your mom home, or will someone else be paying us?”
Medicare Part B is your out-patient health insurance coverage, and doesn’t offer any long term care coverage.
So now, Medicaid. Medicaid (MaineCare here in Maine) is a welfare program. It’s an excellent program, assuming that you don’t have any real assets. If you do have assets, you’re going to need to spend them down to meet the financial eligibility guidelines – roughly $10,000 for a single, or $110,000 for a couple. And in most cases, once you’ve managed to impoverish yourself, your only real care option is a nursing home. So, what have you really accomplished?
The final option is sharing the risk with an insurance company. An affordable, well-designed insurance “safety net” can make all the difference in the world. By finding an insurance plan that will supplement your money, you can stay in control far longer. Don’t kid yourself – if you’re writing the checks to pay for your care, then you’re calling the shots. If someone else is paying the bills, they’re in charge.
Because the long term care insurance industry is evolving so rapidly, there are now several ways to share the risk, including insurance policies which will pay you a benefit even if you never need long term care. If you have assets, and a stable income, you need to explore what these options are. Because there’s so much flexibility in these products, plans can be tailored to meet most family’s needs and budgets.
Once again, you need to have a plan. Your plan might be to self-insure. It might be “the kids will take care of me.” (We’ll talk about that next week.) It might be “I’ll sell the camp and that will be my LTC money.” That may work, assuming that the camp sells when you want it to, for how much you need, and assuming your kids don’t want it. For many, insurance offers a good solution.
So, here’s the question: “What’s your plan?