Will I Be Ready for Long-Term Care?
Too many people brush off the need for long-term care, whether in a nursing home or assisted living. However, The Street’s recent article entitled “Long-Term Care: Ready or Not, Here it Comes” says that some people will be unable to perform two or more of the six “ADLs” – activities of daily living. ADLs are used to measure someone’s fundamental skills needed to live independently. They include eating, bathing and hygiene, dressing, grooming, mobility and toileting and continence. These are considered predictors of someone’s use of paid home care, need for alternative living arrangements and admission to nursing homes or hospitalization.
The Cost of Long-Term Care. Americans are living longer. The Social Security Administration website has a tool called a “longevity visualizer.” It looks at different ages and tells you how long you might live. However, that extra longevity means people are living with chronic health issues. Therefore, it’s easy to underestimate the long-term care costs they might face, even if they have planned for them. Genworth Financial reports that the national median price for a private room in a nursing home facility is more than $105,000 per year. Upward pressure will continue as baby boomers age: prices are projected to double in the next 20 years.
Long-Term Care Insurance. If you have long-term care insurance, you may be ready for long term care. In the past, many of these costs were covered through long-term care insurance, but the industry’s structure has changed considerably over the past 20 years. As a result, many insurers were forced to abandon the business. Those that remained raised premiums dramatically, while limiting benefits. A newer solution to the traditional “use it or lose it” frustration was the advent of a hybrid long-term care insurance policy. This combines long-term care coverage with life insurance benefits. These policies can be purchased with a one-time, lump-sum payment or on a payment plan. However, premiums can be two or three times those of traditional policies. If you die before you use the long-term care coverage, your designated beneficiaries will receive the death benefit. If you need long-term care coverage, the policy will pay out as a traditional one would. The payout will reflect your chosen daily benefit, elimination period, term and total cap. The death benefit, however, is lowered or eliminated altogether, depending on how much you use.
Veterans’ Benefits. The Veterans Administration can often help veterans and their spouses even if they are not ready for long-term care. Although the Department of Veterans Affairs isn’t the easiest system to navigate, it has some valuable programs for those who qualify. Once you’re approved, benefits are paid retroactively to the date of your application. The Veteran’s Aid and Attendance Benefit may be paid to both the veteran as well as the veteran’s surviving spouse.
Self-Funding. If long-term care is needed, and you haven’t made plans to cover the cost, you’ll likely start by making a list of all available financial resources, such as personal savings, pensions, IRAs, 401(k)s, investments and any assets you can borrow against, including the equity in your home to support a home equity loan or a reverse mortgage.
Medicare versus Medicaid. Most people think that they are ready for long-term care because Medicare picks up the cost of long-term care. It doesn’t. It only covers short-term care after a hospitalization but nothing beyond that. For those who can’t pay for care for themselves, the federal government pays for those services through the Medicaid system. This is only available if you have limited income and limited countable assets.
But there is no need to fear. If you don’t have long term care insurance, and if you don’t qualify for Medicaid, a good estate plan by a qualified estate planning attorney can get you on the road to being able to qualify, even if you currently don’t. To fully benefit, this may require some long-term thinking and advance planning. Don’t delay. The five-year lookback period applicable to Medicaid “uncompensated transfers” may apply. It is better to seek help now rather than at the last minute if you or a loved one has to go into a nursing home.
If you liked this article, “Will I Be Ready for Long-Term Care?” you might like these other articles: What to Do with an Inherited IRA? and Handling Guilt When Moving Loved One to Assisted Living Versus Nursing Home and Do Grandchildren Get Some of the Estate If Their Dad Dies before Me? and Estate Planning when So Much Is Uncertain
Reference: The Street (Nov. 10, 2021) “Long-Term Care: Ready or Not, Here it Comes”