Financing for Long Term Care

Jan 19, 2022 2:15:30 PM

Planning for the future is important at any stage of life, but especially pressing when it comes to budgeting for long term care. If you’re expecting long term care needs for yourself or a loved one, here’s a quick guide to costs to consider and how to get ahead of expenses.

What Is Long Term Care?

Long Term Care refers to services that support a person who can no longer care for themselves independently. Usually, the people in need of long term care are older adults, or anyone experiencing a disability or serious health condition that permanently limits their ability to bathe, prepare meals, take medication without assistance, and so on.

Expenses to Expect

  • Healthcare costs: As we age, our general healthcare costs usually rise as well. It’s estimated that by age 65, adults in the US spend around $11,300 per year on healthcare needs such as medications, doctor visits, hospital stays and so on. However, depending on your current insurance policy or the public option available in your state, out-of-pocket costs can vary greatly from person to person.
  • Help at home: It’s generally more cost-effective to receive additional care at home, as compared to moving into a full-time facility for long term care. A professional aid can be hired to visit for a set number of hours per day and help with bathing, dressing, meals, housecleaning and so on. While home aids generally aren’t medical professionals and therefore can’t write a prescription, they can help to manage medication and monitor a person’s general wellbeing. Home care rates run around $25 per hour, depending on what services are needed.
  • Assisted living residence: This type of residence is set up for adults who don’t need round-the-clock medical support, but who aren’t able to live totally on their own. Residents typically live in a private room or apartment, take meals in a group dining room, and can participate in on-site activities with other residents. Residences typically have medical professionals on-call for emergencies. Average monthly costs are $4,300, but this varies widely depending on amenities and medical care required.
  • Nursing home: A nursing home offers 24/7 care. Residents’ healthcare, housekeeping and other needs are all looked after by professionals. This level of residence and care is the most pricey, coming in at over $100,000 per year for a private room.

Cost Considerations

When it comes to aging and long term care, planning ahead is tough. An accident or unforeseen medical diagnosis can radically change a person’s care needs and financial requirements. As much as possible, aim to stay flexible and budget for the worst case scenario. It’s also a smart idea to consider the financial ramifications of family-led caregiving. Will someone need to take fewer hours at work to provide care for an older family member? How flexible is the workplace, and how will this impact other finances? All of these questions are important to consider sooner rather than later, to come up with the best possible arrangement for everyone involved.

What Financial Options Are Available?

Americans over 65 are eligible for Medicare, the federal health insurance program. Medicare will pay for some aspects of long term care, including medication, hospital visits, inpatient and outpatient service, and home health aid. However, Medicare doesn’t cover long term custodial care, i.e. support related to daily necessities like dressing and bathing. When care is covered by Medicare, there may also be cost-sharing requirements. The best way to understand what Medicare will cost in your unique situation is to visit or call 1-800-MEDICARE.

Medicaid, the joint federal and state health insurance program for people with limited income, may also help to cover some medical needs for adults in long term care. Nursing home care or assisted living facilities generally aren’t covered by Medicaid, and programs and eligibility vary from state to state. You can visit or find contact details here for your state’s Medicaid program here.

Long term care insurance is another option for seniors or family members planning ahead for later-in-life needs. These days, most insurance of this type combines a long term care policy with another type of coverage, such as life insurance – so that if money is not paid out on long term care, it goes to the policyholder’s heirs instead. You can also check with your employer, as group policies are sometimes available and may come at a lower cost than an individual long term care policy.

How to Budget

When budgeting for long term care, take the time to understand the costs associated with your specific situation – factoring in current healthcare needs, family medical history, the cost of local facilities and caregivers in your area, and the wishes of the person in question. Once you have some idea of the care needed, get in touch with a Medicare professional who can offer free advice on what’s covered by public insurance and what you can expect to pay out of pocket. Then, it’s time to budget. Evaluate existing financial resources, including retirement funds, life insurance policies, and possible assets such as property, jewelry, and so on. This could also be a good time to start a savings account specifically dedicated to long term care expenses, or to speak with a financial expert who can walk you through any available options to help you budget for ongoing care.

Tags: Budgeting, Elder Care