Paying for Long Term Care
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How will you pay for long term care?
Among all the uncertainties surrounding professional long term care is one sure
thing: It costs a lot. Unfortunately, public programs cover only so much of the
cost. A great majority of individuals must rely on personal income and resources
to pay for long term care. To start determining your long term care plan, learn
about all the possible options:
If family members are willing and able to devote the time and energy required for
care, their help can greatly reduce costs. But keep in mind, an untrained family
member may not be able to provide the level or type of care that is needed. In addition,
caregiving is stressful work that often strains family relationships, and many older
adults prefer not to burden family members. If you plan to have family members help,
be sure to have frank conversations now and on an ongoing basis.
Long term care insurance may provide a high level of coverage depending upon the
policy benefits but it can get expensive particularly for older adults. As a general
rule, the sooner you enroll, the lower your premiums will be. Most financial planners
recommend long term care insurance for those who own assets of at least $75,000,
not including a car or home; expect to have an annual retirement income of at least
$25,000; or are able to afford premiums even if they increase over time. Existing
health conditions may disqualify you, and a medical screening will be required unless
you sign up for an employer-sponsored plan that may waive medical screening during
a short predefined period of time. Check with your employer to see if they offer
long term care benefits. Learn more about Long Term Care Insurance.
While Medicare and other health insurance policies may cover medically necessary
care provided in a skilled nursing facility or in the home after a major medical
condition or event requiring a hospital stay, neither method covers ongoing personal
or custodial care, including help with essential daily activities. Medicare and
health insurance don’t cover most long term care because the need for care often
develops gradually, rather than as a result of a hospital stay for a specific medical
condition or event. Learn more about Medicare or health insurance.
Medicaid covers long term care only for those who meet strict state-specific financial
eligibility requirements. Personal investments and assets must be almost completely
exhausted before Medicaid can be accessed. Even when that’s the case, Medicaid covers
services only from a list of approved providers. If relying on this option, be sure
to look into the types of providers and facilities approved by Medicaid to be sure
these are acceptable to you. Learn more about Medicaid.
Some insurance companies offer long term care additional riders for life insurance
policies. Other options may enable you to use your life insurance policy to help
pay for long term care. Accelerated death benefits and viatical settlements (selling
your policy to a third party) provide payments lower than the full value of the
policy, but can make sense for those who are terminally ill or in poor health. A
life settlement essentially sells your life insurance policy for its present value—often
a wise choice for those who no longer need or want a policy. Learn more about life insurance.
For homeowners over 62 years old who are reluctant to sell, a reverse mortgage is
a type of loan that gradually converts the built-up equity in their home into money.
The payments are tax-free, there are no health requirements, and the loan doesn't
have to be repaid until the owner moves or dies. Heirs can then sell or refinance
the property. Learn more about reverse mortgages.
Offered by most employers and sold individually, disability insurance replaces some
of the income lost when an individual is unable to work due to an illness or disability.
While coverage does not specifically cover long term care or health expenses, you
can use payments as you see fit. Employer-sponsored coverage is generally available
only while you’re employed by the company up to age 65, not after you’ve retired.
Because it replaces only a portion of your salary and may be subject to time limits,
it is unlikely to cover all the long term costs one might incur while away from
work. Learn more about disability insurance.
Other Options:
Long term care annuities, the sale of a home, and personal savings are sound funding options for many.
If eligible, look into how the Veterans’ Administration can also help with long
term care services. The VA owns and operates nursing homes and provides some at-home
care, including nursing, home health aide services, homemaker services, and community
residential care. Eligible veterans may also receive respite care, adult daycare
services, and geriatric care management services. Contact the nearest VA hospital
to determine eligibility.
References: National Clearinghouse for Long-Term Care Information, www.longtermcare.gov; A Shopper’s Guide
to Long-Term Care Insurance, National Association of Insurance Commissioners, 2006.
