In this post, we will cover in general terms the various resources available to cover the cost of Long-Term Care (LTC). For many, the ever-increasing cost of LTC is prohibitive, or at very least, an intimidating line item in a personal or household financial plan. On average a semi-private room in a nursing home facility is nearing $7,500 per month nationally. Depending on your location this figure can climb quite a bit higher.
First and foremost, let’s define LTC in terms of activities of daily living. Below are the types of services and LTC facilities provide and the triggers for admittance. Activities of daily living include:
- Hygiene – bathing, grooming and oral care
- Dressing – the ability to physically dress and undress
- Eating – the ability to feed oneself (but not necessarily prepare meals)
- Continence – the ability to use the restroom
- Transferring – the ability to stand and sit and walk independently
Now we’ll briefly discuss the types of LTC facilities. The most likely and desirable situation is simply remaining in one’s home, which is otherwise known as home care. This option allows for the most independence and can be provided by a family member or an in-home skilled nursing service.
Next is assisted living, providing aging adults care in a residential setting that typically provides a lifestyle and social aspect in addition to 24-hour access to staff and assistance with the activities of daily living.
Next are skilled nursing facilities which provide care 24-hour a day care by licensed professionals (doctors and nurses). In addition to activities of daily living, skilled nursing facilities include wound care, IV therapy, ongoing monitoring of various conditions, and physical/occupational therapy. The goal of a skilled nursing facility is to return its patients to their homes once they are able to care for themselves.
Finally, we have nursing home care. A nursing home is designed to provide most of what skilled nursing facilities have to offer, but is intended for long-term residential care. In fact, more and more nursing homes and skilled nursing facilities are combined, separating different needs to different floors allowing for a seamless transition back-and-forth.
Now, let’s turn to long term care financial planning. That is, how to cover the expenses associated with LTC.
- Out-of-pocket savings: this is very straightforward and always our goal when building financial plans for those we work with. Even when a financial plan is able to support LTC expenses, we explore all the options listed below. Turning the conversation from needs-based to asset-based long term care, with a focus on wealth transfer and wealth preservation. A topic that requires its own blog post and one we’ll revisit in the future.
- Government programs: it is worth noting that Medicare DOES NOT pay for the cost of extended LTC (Medicare long term care, in short, does not exist). Rather, Medicaid pays for LTC. Medicaid, however, is dependent on owning assets other than one’s home. Couple this with finding a Medicaid eligible facility, this is not something you can count on. That is not to say there aren’t programs available for those needing assistance. Resources exist on the internet through aarp.org, www.caring.com, www.nia.nih.gov and others.
- Life insurance with long term care (LTCI): there are various approaches to LTCI. We’ll cover the three most popular, each with their own unique advantages and disadvantages.
Traditional LTCI policy Pros: Inflation protection, shared care benefits with your spouse, tends to be the most affordable option
Traditional LTCI policy Cons: Premium is not fixed, ‘use-it-or-lose-it’
Life Insurance policy with LTCI rider Pros: Fixed premium, meaningful death benefit to your beneficiaries if you don’t need LTC
Life Insurance policy with LTCI rider Cons: Inflation protection typically requires a large death benefit, tends to be the most expensive option
Hybrid LTCI policy Pros: Fixed premiums, inflation protection, moderate death benefit if you don’t need LTC
Hybrid LTCI policy Cons: death benefit is limited
This is by no means meant as an all-inclusive list, nor a comprehensive summation of pros and cons. If you are beginning to think about LTCI, already have it, or have spent years funding cash value life policies, we hope this will help you to start a conversation with us. It is never too early to address future LTC needs when considering savings, government assistance or insurance to reduce or eliminate this expense.
We recommend you begin with a comprehensive financial plan to identify what your and your spouse’s needs and available resources are before deciding on a funding option that works for you. As always, we’re here to help!
If you’d like to discuss in more detail or help guiding you in the right direction, please click below and we’ll reach out to schedule a time convenient for you:
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