Understanding Long-Term Care and How to Pay for It

Understanding Long Term Care and How to Pay for It

Long Term Care is a very personal issue to me. The only argument I ever remember having with my father was on the topic of long term care. He was a doctor and did not believe he needed it. He would assure me if he did that he would “just take a few pills” and end his misery, which, of course, was an unacceptable answer to his daughter. Four short years after this argument (that I won and he bought long term care insurance), he started to show strange symptoms of premature memory loss. My father had a very rare illness caused by a head injury from a car accident in his 20’s. As the disease progressed, he needed long term care assistance in his home. He was only 59 years old.

It started more as custodial care but eventually moved to round-the-clock care, and we even had to put an elevator in the house. As you can imagine, the cost of his care was very high, and we would not have been able to afford it on our own. We lost him at 62 years of age, and those last three years were so hard on the family. I cannot imagine if we also had the extra stress of not having insurance to help us.

After 22 years as Certified Financial Planner, this is a topic I have great passion around and have helped families face this difficult issue. I have also sat across from many clients who also told me that they would “just end it” if they were faced with this type of need. What I tell them and will share with you is the opposite happens. My father wanted to live, even with all the pain he was in. He wanted nothing more than to see his grandchildren grow, and we would have done anything to make him comfortable.

If you walk into my office and are 40+ years old, we are discussing long term care options. It’s not always an easy topic to discuss, but I know personally how hard it is to make decisions when someone you love needs this care. Even more, I know how expensive it is to take care of loved one with the dignity they deserve. I have owned my own long-term care insurance policy since I was 39 years old and never intend to miss a payment. I have seen too much. And whether or not you have been affected by someone with long-term care needs, the chances are high you or someone you love will eventually require assistance.

Long-Term Care Affects Us All

This is an issue that faces all of us. 7 out 10 will require some sort of long-term care assistance in their lives. Many of us associate long-term care with nursing homes but it also includes assisted living facilities, adult day care and paid caregivers. The likelihood of needing some sort long-term care assistance is high and who pays for this care?

Our Medicare/Medicaid Misperception on Long Term Care

There is a widespread belief that Medicare and/or Medicaid will cover your long-term care costs. The answer is yes and no. Let me explain.

Medicare Does Not Cover Long-Term Care Costs

Medicare provides coverage for rehabilitation, but not long-term care (i.e. an extended or permanent nursing home stay). Medicare will pay for up to 100 days of convalescent care if an individual has spent at least three days in a hospital for medically necessary care. Immediately upon discharge, the individual must go to a Medicare-certified skilled nursing facility and be expected to recover and return home to qualify for this coverage.

PLEASE NOTE: Most health insurance, including Medicare, does not cover nursing home care. However, do not drop a loved one’s health care insurance when they enter a nursing home. They still need health insurance or Medicare to cover their medical expenses while in a nursing home.

Medicaid Covers Long-Term Care Costs After Assets Have Been Depleted

If an individual cannot cover their long-term care costs or they have exhausted their assets, then they become eligible for assistance from Medicaid. To qualify for Medicaid, applicants must have minimal assets or a poverty level income, generally no more than $2,000. For married couples, every state has its own “spousal protection” rules so that the healthy spouse can continue to live in the community. Be aware there is still a maximum amount of assets s/he can keep. Most individuals who need long-term care services will initially cover expenses with their own assets until they qualify for Medicaid.

Gifting Assets Can Delay Medicaid Eligibility

Some of you may think the answer is to simply gift assets to children and/or grandkids, so you may qualify for Medicaid while still leaving a legacy to your heirs. If you do this within five years of applying for Medicaid, you could be disqualified from receiving its assistance for a certain period of time, which means until your penalty period is completed, you will have to pay the costs out-of-pocket.

PLEASE NOTE: There is nothing illegal or wrong with dispersing your assets prior to needing Medicaid. Depending on your individual situation, it may or may not make sense to do this. Please seek the advice of a reputable lawyer specializing in elder care to fully understand the ramifications of doing so regarding your personal situation, including taxes and potential ineligibility period of Medicaid benefits. And don’t forget, once you give away your assets, you cannot control how they are used or get them back.

How Can I Protect My Home?

Your home is an exempt asset, but if the owner dies while receiving Medicaid benefits, the government must try to recoup their costs from their estate. They cannot put a lien against a home if a spouse, disabled adult child or minor child currently resides there. To avoid this, some may choose to add a child’s name to their deed to protect their home. This is considered a gift by Medicaid and again may make you ineligible for Medicaid for a period of time.

Beyond that, this is not a decision to be taken lightly. Putting a child on your deed effectively makes them a co-owner. You cannot sell your home without their permission or if they die before you, their heirs now co-own your home. And most importantly, your home is now an asset of your child, which means your home could be used as collateral if they have financial problems or are sued.

Don’t Be Afraid to Seek Professional Help

Rules are frequently changing and I suspect they will only continue to do so. There is so much misinformation out there and too many people make decisions based on incorrect or outdated information. Do not make knee-jerk reactions out of fear. I strongly encourage you to work with lawyer experienced in elder law or Medicaid law in your state. They can help you make informed decisions regarding your personal situation.

How Do I Pay for Long-Term Care?

This is both simple and complicated as there are really are only three options.

Your Own Assets

You and/or your parents foot the bill in its entirety. This may be a good option if the individual isn’t expected to have a pro-longed stay or has significant assets. You may also want to consider potentially covering the cost for the parent who needs long-term care first. This way the healthy spouse does not need to worry meeting asset and income levels for Medicaid coverage. Again, there are rules so a healthy spouse isn’t impoverished, but they still cannot have substantial assets and may be at risk of their assets running out.

We don’t always think about how we will pay for long-term care costs. You may want to add long-term care as an investment goal and work with your financial advisor to create a plan to cover your estimated expenses.

Long-Term Care Insurance Covers Costs

Long-term care insurance policies reimburse a predetermined daily limit for nursing-home care, home-health care or personal or adult day care services that assist with daily living activities, such as bathing, dressing, or eating. You select a range of care options and benefits that allow you to get the services you need, where you need them.

The cost of your long-term care policy is based on:

I won’t pretend that long-term care insurance is cheap. For most of my career LTC insurance premiums did not increase, which led many policy holders to believe they never would. But in the past few years premiums have increased almost every year. Now my mother calls and asks if she should pay her long-term care insurance premium, and I assure her it is worth the additional cost. So if you have experienced premium increases, you are not alone, and I encourage you to continue paying the premiums as well.

Additionally it is getting increasingly difficult to find long-term care insurance, so if this is an option you and/or your parents are interested in pursuing, I suggest looking into it immediately. If you and/or your parents don’t qualify, then you need to create a long-term care plan with your personal assets and potentially Medicaid. Or if it is cost-prohibitive for your parents, perhaps you and your siblings could cover the premiums for them.

Qualify for Medicaid

If you do not have long-term care insurance or your coverage runs out and you have depleted your assets, you may qualify and apply for Medicaid assistance.

Stay Focused on What Matters Most

I know this is a lot to absorb and can be very overwhelming. Do not feel you have to do this alone. There are professionals from elder care lawyers, financial advisors, tax attorneys and/or accountants that can help you make informed decisions on your individual situation.

And most importantly, remember why you are doing this. Everyone wants and deserves to be treated with respect and dignity when they are no longer able to care for themselves. Make decisions now as to how you (or your parents) want to be treated when the time comes so you can afford to make them a reality.


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August 24, 2014  •  26 Comments  •  Finance

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  1. Monday, August 25th, 2014
    Long term care is something I hear Suze Orman talk about all the time, but it's never in great detail. As something I know to be necessary but not sure exactly why, they post is really helpful. Thanks for the details; it helped clarify the topic a bit for me.
  2. Monday, August 25th, 2014
    This is a very delicate, yet important conversation to have with our parents and with ourselves once we get close to 40 years old. Kate and I had this conversation with our respective mothers and they both seemed somewhat offended at the suggestion. They both pointed to their mothers who are in their 80s and are stronger than most of us and didn't think they needed it.

    Unfortunately we haven't been able to convince them yet, but we keep trying and we keep sending them information about the matter. I hope they never need it but I also hope to be able to convince them to get it before they need it.
  3. Monday, August 25th, 2014
    This scares the crap out of me. :( I often wonder about my future and I'm not unrealistic to think that can never happen to me, but as of right now, I have no dependents and no spouse…so it's all on me! I hope at least I have a spouse by then! :) But anyway, I get scared just thinking about being able to have a good retirement savings, let alone long term assisted care. Any thoughts?
  4. Monday, August 25th, 2014
    Thanks for this well written and detailed post Shannon. It's something that we worry about as my DH and I both have elderly moms still alive whom neither have long term care insurance. This means any financial burden will fall squarely on our shoulders if they should ever need long term assistance. My mom's situation is far better than that of my MIL's. She lives in Canada and can be placed in a government long term facility if the need should arise and it would solely be the cost of her pensions every month.
  5. Monday, August 25th, 2014
    Fantastic and much needed piece. I had a similar argument with my father in law. "Luckily" (nothing really lucky here....) he fell and hit his head after he was diagnosed with Parkinsons because he could have lived a long, long time with that disease and needed a nurse for many years.....
  6. Monday, August 25th, 2014
    I fought with my dad about long term care as well! Especially because my stepmom has a history of alzheimer's in her family. The best time that you should shop for long term care is in your 50s and yet most people don't want to think of it then. When client's ask me what keeps me awake at night, I say retirement savings for people in their 20s and 30s because it is near impossible with their student loan bills and then long term care for anyone over 60. The costs continue to rise and it is such a massive burden once a need arises that it can cause severe financial strains not just on the person who needs it but on their family and loved ones.
  7. Monday, August 25th, 2014
    This is such a complicated and emotional issue that I have to give you lots and lots of credit for taking it on. I get the chills just reading about it and realizing what misery lies ahead.
  8. Monday, August 25th, 2014
    Shannon, I love how you write so well and you are so detailed when explaining such important topics. I have learned so much from you and some of which were things I didn't even realize that I needed to know. For instance, the issue that you've written about here. I was clueless about most of the major points that you made here and after reading this, I can't believe that I knew nothing about such an important part of life. Thank you so much for teaching me so many valuable things! You are awesome at what you do!
  9. Monday, August 25th, 2014
    Thanks for going through this. I brought it up to my mom a few months ago and found out she was ineligible for LTC insurance. Perfect :(
    I've started to think of estate planning and long term care issues as a family issue. If my dear Momma doesn't have her affairs in order, it's a mess for the whole family. Time to round up the parents and get their documents together. Thanks for the reminder.
  10. Monday, August 25th, 2014
    I'm sorry to hear about what happened with your Father, Shannon, that must have been really difficult for your family to go through. This is such an important subject. We don't have a long term health care in place although we have life insurance. I've always worried about the clauses that are involved with such policies and not being able to claim when it comes to the crunch. Yet the alternative is a prospect that doesn't bear thinking about. I do worry about my own parents. My mum has stated there's no way in the world she's going into a nursing home if and when the time comes and she's already disabled. I'm sure when it comes to it, I'll have to make some very hard decisions and as you say, who will pay for this? I'll certainly bear this post in mind for the near future Shannon, it's something that I need to investigate here in the UK.
  11. Monday, August 25th, 2014
    I'm so sorry to hear about your father's experience, Shannon, and for losing him so soon... my parents are 60 and above, and it seems too young. I know that my parents have long-term care, and I think B's dad does, but it didn't really click until recently that we'll need to consider it, as well, especially with B being over 40. Thank you for all the tips and information - it is a lot to absorb, but it's very helpful in helping us create a long term plan.
  12. Monday, August 25th, 2014
    I'm so sorry that you lost your father at such a young age. Very informative post Shannon and a lot to absorb. I may have to re-read this 2 or 3 times (or maybe more), to figure out what I need to ask my dad and figure out what he has and doesn't, and then broach the subject with him. I may have some additional questions for you!

    Thanks for writing this post Shannon. I have quite a bit to learn regarding long-term care.
  13. Monday, August 25th, 2014
    Even though my parents won't discuss financial issues with us, I know they both have long term care insurance. After dealing with taking care of their parents, they made sure of it. I would have a hard time getting a policy now, but we'll see in a few years how I feel about it. Even if you qualify for Medicaid, that doesn't mean a bed is available in your area. I think that would be terrible to get to that point and have to be shipped out to somewhere unfamiliar because that's the only place that would take me.
  14. Monday, August 25th, 2014
    I can't imagine how hard it was on both your Dad and your family for him to have memory loss and needing long-term care. Do you know when the ideal time is to buy this insurance? I know life insurance is typically recommended ASAP when you have a spouse and/or children, but what about this insurance? Is there any benefit in getting it in your 20s, 30s, or 40s versus 50s?
  15. Monday, August 25th, 2014
    I'm sorry to hear you lost your Dad at such a young age. It's good that you did have the insurance at that time, to lessen your burden. My father is 89 years old and slowing down, though he still lives on his own and drives. It's his kidneys that are giving him problems, otherwise he's in good shape.
  16. Tuesday, August 26th, 2014
    After working in the funeral industry, I am very aware of the need for more people to buy long-term care insurance. The problem is that it is so incredibly expensive. Most people simply cannot afford it at a time of their lives when they are also paying a lot for medical care as well.
  17. Tuesday, August 26th, 2014
    Thanks for sharing your story, Shannon. After working in insurance, I know the limitations that most care has, which is why despite the cost, I think most individuals 60+ (maybe even younger, depending upon your health) should have long term care insurance. It really does make sense for the peace of mind, and if, unfortunately, you need it.
  18. Tuesday, August 26th, 2014
    Very informative. This is definitely a very complicated issue. Protecting the home and assets is something I hear often about and want to learn more about as my parents have asked about. When it comes to the IRS and Medicaid/Medicare, it's best to get professional advice. Long-term care insurance seems to be pretty important, but can be quite costly. I would never have thought to get insurance at 39, maybe it's something I need to look into in the next few years. Sorry to hear about your father's experience.
  19. Tuesday, August 26th, 2014
    Hi Shannon,

    I was reading through the comments and I have to agree with Stephanie! I didn't know about this so thanks so much for sharing all this information with us.

    This is something we'll have to sit down and discuss as well as with our parents. My parents are "old school" and think taking medicine will fix all :),

    Hope the girls had a great first day of school!
  20. Thursday, August 28th, 2014
    I know there will be a time in the future where I will need to have retirement savings like the long term assisted care. But now, I just have to mind if my parents can avail this, they're retiring very soon. Better be prepared.
  21. Thursday, August 28th, 2014
    Shannon, when I read the first couple posts in this series, I thought, "I don't need to talk to my parents about this stuff yet, they are only in their mid-late 40's." But now, I can see why I do need to start approaching these subjects with them and I need to do some work on my own plans too, despite my young age. We never know when something could happen and I don't my family to be responsible for paying my debts if I were to pass away before they are paid off.
  22. Friday, November 21st, 2014
    Hiring a lawyer to help you get a handle on the ever changing rules isn't a bad idea at all. It's really hard to keep up with the rules if you are in the middle of figuring this stuff out so why not ask for a little help.
  23. Friday, May 8th, 2015
    I like how you said, "make decisions now as to how your parents want to be treated when the time comes so you can afford to make them a reality". Life takes planning. Although it is not the most comfortable subject to discuss, talking about it early can really help the future be less stressful.
  24. Thursday, June 11th, 2015
    It must have been hard seeing your father deal with those health issues at such an early age. I can only imagine how nice it must have been to have that long-term care set up before he started to exhibit those symptoms. I'm not sure how I would handle the situation if something like that were to happen to my dad while not having some kind of care option in place.
  25. Wednesday, August 12th, 2015
    It is looking like we need to move my mom into an assisted living center soon. She cannot pay for the facility herself. Are these places great with accepting multiple forms of payment? As her son, I am figuring that I will be covering some of the monthly costs of her residency at the assisted living center.
  26. Sunday, October 22nd, 2017
    Thanks Shannon for your sound info.Spending money on home health care is the biggest concern nowadays.Saving money on health care is always highly demanded.People spent a lot of money to secure their health for emergency purposes.A quality health care with a suitable budget needs to require some serious brainstorming to determine the best outcome.I have tried a lot of ideas to find out the best way for my parent's health care.Your generic concepts are highly appreciated. I found your article more interesting and useful as a tool which could help me to explore new ideas about my health care visions.
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    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan