Heard about long-term care, but not sure what it is?
Long-term care is necessary when any disease or injury keeps you from being self sufficient over a long period of time.
It is estimated that 70% of people over the age of 65 and 40% of individuals under the age of 65 will need some sort of long-term care. Long-term care can be arranged in your home or in an outside facility.
Key Definitions & Cost
Care that is provided in your home may be provided by Personal Care Assistants or Companions, Home Health Aides, and Nurses.
- Health Care Assistants help with cleaning, cooking and doing errands.
- Home Health Aides help with personal care like bathing and dressing.
- Nurses help with medications, IVs and other complex health issues.
Care that is provided in an outside facility is provided by various arrangements, including Adult Day Health Care, Assisted Living, and Nursing Homes.
- Adult Day Health Care includes daytime social and therapeutic activities.
- Assisted Living is intended for living independently with onsite support for daily basics.
- Nursing Homes offer more skilled care, supervision, medication, therapies, and rehabilitation.
The cost of long-term care can be staggering without adequate planning or insurance coverage. Take a look at the average annual costs around San Jose, CA:
| Home Care | |
|---|---|
| Homemaker Services | $52,624 |
| Home Health Aide | $54,912 |
| Adult Day Health Care | |
| Adult Day Health Care | $21,840 |
| Assisted Living Facility | |
| Private, One Bedroom | $45,000 |
| Nursing Home Care | |
| Semi-Private Room | $88,330 |
| Private Room | $105,850 |
Payment Options
In general, Americans are not sufficiently prepared to pay for long-term care. Many of them go through their lives simply hoping that they won’t ever need it. Unfortunately, in the event that you or a loved one does need long-term care, hope won’t be enough to protect you from potential financial ruin.
Also, the odds that you will need some kind of long-term care increase as you get older.
Self-Insurance
To self-insure — that is, to cover the cost yourself — you must have sufficient income to pay the rising costs of long-term care. Keep in mind that even if you have sufficient resources to afford long-term care now, you may not be able to handle rising future costs without drastically altering your lifestyle.
Medicaid
Medicaid is a joint federal and state program that covers medical bills for the needy. If you qualify, it may help pay for your long-term-care costs. Unfortunately, Medicaid is basically welfare. In order to qualify, you generally have to have few assets or will need to spend down your assets.
State law determines the allowable income and resource limits. If you have even one dollar of income or assets in excess of these limits, you may not be eligible for Medicaid.
To receive Medicaid assistance, you may have to transfer your assets to meet those limits. This can be tricky, however, because there are tough laws designed to discourage asset transfers for the purpose of qualifying for Medicaid. If you have engaged in any “Medicaid planning,” consult an advisor to discuss new Medicaid rules.
Long-term Care Insurance
A long-term care insurance policy may enable you to transfer a portion of the economic liability of long-term care to an insurance company in exchange for the regular premiums.
Long-term care insurance may be used to help pay for skilled care, intermediate care, and custodial care. Most policies pay for nursing-home care, and comprehensive policies may also cover home care services and assisted living. Insurance can help protect your family financially from the potentially devastating cost of a long-term disabling medical condition, chronic illness, or cognitive impairment.
A complete statement of coverage, including exclusions, exceptions, and limitations is found only in the policy. Some of the premiums for Long-term care insurance may be tax deductible – check this out with your accountant.
Long-term Care Riders on Life Insurance
A number of insurance companies have added long-term care riders to their life insurance contracts. For an additional fee, these riders will provide a benefit — usually a percentage of the face value — to help cover the cost of long-term care. This may be an option for you.
For more information, including a free DVD (“Kiplinger’s No-Nonsense Look at Long-term Care and How to Pay for It”) to help you understand more about long-term care, please contact us at 408.288.5111.