As the population continues to age, one of the main concerns people have about themselves or their loved ones is how to pay for long term care. The cost of long term care depends on the level of care that you need. Skilled nursing home care is the most expensive. Assisted living facilities are typically less than nursing homes. In home care costs vary depending on the level of care needed and the number hours per day that care is necessary.
Figuring out how to pay for long term care can be complicated but in the end, there are only 3 ways to pay:
- YOU PAY;
- YOU HAVE LONG TERM INSURANCE TO PAY;
- THE GOVERNMENT PAYS YOU PAY.
If you do not have long term care insurance, you will have to pay for long term care out of your pocket. If your income is sufficient to pay for care, that is wonderful. If not, you may have to pay the difference by depleting your savings each month. With the national median cost of nursing home care in the United States at $6,844 a month, it does not take long to use up your life savings if your income is not sufficient to pay for care.
LONG TERM CARE INSURANCE
Long term care insurance is the best way to pay for care. These policies pay for in home care, assisted living care and long term nursing care. Unfortunately, most people do not have long term care insurance. By the time most people consider getting it, the premiums are too high or their health no longer allows them to qualify. Traditional long term care policies pay a daily amount to your caregiver or care facility. Many of those policies have limits on that daily amount and most pay only for a limited amount of time. Once the time is up, you would have to begin paying out of pocket for care.
There are some relatively new types of long term care policies on the market. These new products do not require premium payments in the traditional sense so they are not “use it or lose it” policies. Instead, they leverage your existing assets such as bank accounts, IRA’s and life insurance to provide a long-term care insurance benefit to you should you need it. These products are worth looking at if you have significant assets.
THE GOVERNMENT PAYS
Veterans Pension Benefits (Aid and Attendance)
If any group has earned help with paying for long term care expenses, it is our veterans. There is a benefit known as Veteran’s Pension (also known as Aid and Attendance) available to some wartime and older veterans through the VA to help offset long-term care and medical costs. These benefits are non-service connected and can pay more than $25,000 per year tax-free to the veteran. Sadly, only about 5% of eligible veterans are receiving this benefit. If you qualify, this benefit can be used to offset the costs of in home care, assisted living facility costs as well as long term nursing home care.
Medicare versus Medicaid
Many people mistakenly believe that Medicare will pay their long-term care expenses. However, that is not true. Medicare will only provide limited benefits for “skilled care”, such as physical therapy or injections that require the assistance of medical professionals or rehabilitation staff and limited home care but only for the first 100 days per incident of illness. Custodial care, which provides assistance with activities of daily living (ADLs) such as dressing, bathing, medication management, etc., is typically not covered by Medicare.
On the other hand, Medicaid does cover custodial care, as well as skilled care on a long-term basis. The good news is that there are no arbitrary time limits and no burdensome co-pays with Medicaid. Patients who qualify can get the care they need and families can rest easy knowing they will not be burdened with long-term care costs. Medicaid does not cover in home care or assisted living except in very limited circumstances. The bad news is that it can be difficult to qualify for Medicaid. There are income and asset limits that cannot be exceeded to qualify.
While the income limits vary a bit from state to state, in general, if your income exceeds $2,205 per month to qualify. However, if you assign your income to the care facility through a Qualified Income Trust, the income issue is not a problem. The trust allows you to assign your income to the nursing home to pay for care and Medicaid will pay the rest if you otherwise qualify.
As to assets, an individual cannot have more than $2,000 in total countable assets in most states. There are some assets that Medicaid does not count such as a car, prepaid funeral plan, and home furnishings among other things. These are known as non-countable or exempt assets. If married, the community spouse can keep all exempt assets as well as one half of the total assets up to $123,600 in 2018. This is known as the Community Spouse Resource Allowance (CSRA) The CSRA varies from state to state. Assets over the CSRA must be spent down completely before you are eligible for Medicaid benefits. Long term care is expensive and there are only three ways to pay. Without planning, most people wind up paying out of pocket and spend their life savings doing so. A proper plan can help protect your life savings and still allow you to get the care you need.
We can help you put a plan in place to protect your life savings - call us today to learn how - 256 237-3339.