Long Term Care: who is going to take care of me when I get old?
November was Long-Term Care (LTC) Awareness Month – which was designated back in 2001. I suspect that they chose this month because it’s right around the holidays, when many of us are visiting with friends or family that we may not have seen in a year or longer.
As we reconnect and share stories with loved ones it may have become evident that many of us are living longer and more prosperous lives than our predecessors.
Something we may not have considered as we gather for meals and parties however is this:
Which of these people may be put in the position of being a caregiver for me?
Who might I have to assist with their daily living needs?
According to the US Department of Health and Human Services, there’s a nearly 70% chance that those of us over the age of 65 will need some type of long-term caregiving for an average of three years. This raises some important questions for caregivers.
If you were asked for assistance, what could you do to help? Will your work or other demands allow you to make a meaningful commitment?
If you don’t live in the same town, how could you monitor care or advocate for others?
Who would you go to if you needed guidance or help yourself?
Many of us in “sandwiched” between providing for minor children and for our parents.
Even if you haven’t thought about this, state governments are paying attention to the rising costs of our aging populations since they carry much of the burden. We have recently seen a first-in-the-nation new payroll tax enacted to help fund LTC costs in the state of Washington. Now 19 other states are considering or in the process of adding legislation to address Long-Term Care costs.
So, whether you are young or old, it’s crucial that all of us get familiar with what Long-Term Care involves, what it could cost you, and the resources available to you.
How much do Long-Term Care Services cost?
Caregiving can start with very minor steps like assisting with home organizing and bill payments, driving to various appointments, etc., but it can accelerate into certain daily activities that define Long-Term Care Services like assisting with bathing and dressing. Further, Skilled Care may be required if medications need to be administered or speech or physical therapy is involved.
The costs of these various levels of care can vary dramatically. According to Genworth, the national median annual cost of a private room in a nursing home was $108,408 in 2021. The cost of home healthcare was $61,776 per year, and the cost of assisted living was $54,000 per year.
Long Term Care Resources
How can someone go about paying for these expensive services? Much of these long term care costs may ultimately be borne by the individual or family. Unfortunately, unless you have short-term needs or have exhausted your other resources, government programs are not going to assist you.
Medicaid: Medicaid is a joint federal and state program that provides health coverage for low-income and needy people (regardless of their age). It can cover most of the costs of LTC services for those who meet eligibility criteria – which varies from state to state – but this typically this means having little to no assets in order to qualify. These programs are under budgetary strain due to our aging populations and also do not guarantee the availability of LTC services; thus, they should be considered a last resort.
Medicare: Medicare is a health insurance program available to those over age 65. It covers some of the costs of LTC services, but only for a limited time and under certain conditions. For example, if you were hospitalized and discharged to a nursing facility, it can pay for up to 100 days of skilled nursing facility care per benefit period. However, Medicare does not cover assistance for everyday activities like bathing and dressing which are a common LTC needs.
Personal Assets and Family: Often referred to as “self-insuring”, you can use your savings, investments, or other assets and income to pay for LTC services. However, as shown above, these costs can deplete your assets quickly depending on the need – so if you want to leave assets for the next generation, this can be a concern.
Your spouse, children, or others might be able to directly assist as caregivers, act as care advocates, and/or assist in paying for LTC services. Any of these could add significant emotional and financial strain for these loved ones, and it’s important to establish if they have the time, ability, and resources to actually assist with LTC needs.
Long-Term Care Insurance: This insurance is designed to offset the costs of LTC services. Depending on the provisions in the policy, it can cover various levels of caregiving for a pre-established period of time. LTC insurance policies can become quite expensive depending the age when you apply and the benefits and limitations in the coverage. Hybrid policies – combining life and LTC insurance provisions – have become more common in recent years and address some of the criticisms of traditional LTC insurance.
Think about what happened in Washington state and how that may impact your personal finances through your life and career because it’s possible similar programs will be implemented across the country. Washington implemented a mandatory payroll tax, but allowed people who owned certain LTC insurance policies to be exempt from the tax!
Takeaways
Generally, no single resource listed above is going to fully address the possible caregiving needs a person or family may have, so it’s important to educate yourself and have a strategy for using several of them. Take the time to consult with your financial advisor about your financial resources, insurance options, and legal documents, so that if the need for LTC arises you can effectively respond.
It’s also critical you communicate with the important people in your life so that they know you have thought about Long-Term Care and have a general plan, even if they don’t have the details, which can ease the stress they may carry. As we continue into the holiday season, now is a great time to talk and share thoughts on important issues like this.
We are financial advisors in La Jolla, California, serving clients across the country. If you would like to set up a time to speak, please contact us.
Sources
Administration for Community Living. Longtermcare.gov. How much care will you need? https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
Genworth. Cost of Care Survey. https://www.genworth.com/aging-and-you/finances/cost-of-care.html
LTC News. (2021, October 29th). Multiple States Considering Implementing Long-Term Care Tax. https://www.ltcnews.com/articles/multiple-states-considering-implementing-long-term-care-tax
Chris Jaccard, CFP®, CFA is a lead advisor with Financial Alternatives in La Jolla, CA. When he’s not working on home improvement projects or trying to keep up with his kids, he loves to help successful families consider their alternatives and make better financial choices with the EXPERT™ Advisory Process. Schedule a time to chat about your situation or the latest project.