Your Introduction to Long-Term Care
Did you know that almost 70% of seniors 65 and older will need long-term care in their lifetime, and on average may need it for up to three years? A large portion of long-term care involves help with activities of daily living. As seniors age, they may require assistance with things that we take for granted each day. 1 in 4 unpaid family caregivers find it difficult to provide their loved ones with proper care. 40% of family caregivers also find that the most difficult duties are dealing with personal care—such as incontinence, changing adult diapers, and bathing. It may surprise you that Medicare, Medicaid, and private health insurance policies might not pay for long-term care.
Know Your Long-Term Care Options
These are the most popular long-term care options for many families:
Adult Day Care—These centers are best for seniors that are mobile and physically independent. Adult day care centers can provide your loved one with activities, meals, counseling, respite care, and sometimes transportation. Depending on the adult day care program you choose, seniors may attend for as little as one day or as many as five days a week. For seniors who live with family members that work full-time, these programs may work well. If you are experiencing caregiver stress, this may be a great way to alleviate some of your stress from caring for your loved one. Your loved one will experience plenty of social interaction with other seniors, which can reduce their likelihood of developing depression and anxiety.
Assisted Living Community—Many assisted living communities strive for a “home-like” setting. They offer meals, social activities, and have a nurse on-staff. Personal care needs like help with eating, bathing, dressing, and toileting are available at assisted living communities, but usually costs extra for this care. If your loved one requires one-on-one assistance, you may be required to hire a caregiver at an extra cost to you.
Nursing Home—A nursing home primarily benefits seniors who require on-going skilled nursing that require monitoring by a Licensed Practical Nurse or Registered Nurse—complex wound care, a ventilator. When choosing a nursing home, pay attention to their staff-to-patient ratio. Many nursing homes rely on call buttons to attend to patients, so nursing homes with lower staff-to-patient ratios may be more attentive.
Home Care—According to an AARP study, 90% of seniors prefer to age in the comfort of their own home. Some seniors rely on unpaid family caregivers to assist them, but many whose needs go beyond what family can support opt to hire a professional caregiver. Home care often offers the most personalized, affordable and flexible long term care option available to seniors. Professional caregivers provide companionship and help with everything from light housekeeping to personal hygiene care and medication reminders. You can hire a caregiver by working with a home care agency, find one yourself through a website like eCaregivers, or by word-of-mouth.
[Editor's note -- if you've already picked out a long-term care option and are looking to supplement it, it's worth looking into elder service agencies or getting consulting from a geriatric care manager. Don't forget to take care of yourself, too!]
How Much Does Long-Term Care Cost?
Long-term care costs vary depending on the level of care your loved one needs and their geographical location. Here are the national averages from the latest 2015 cost of care survey from Genworth:
- Home Health Aide Services
- National median hourly rate of $20
- National median annual rate of $44,616
- Adult Day Care
- National median daily rate of $69
- National median annual rate of $45,760
- Assisted Living
- National median monthly rate of $3,600
- National median annual rate of $43,200
- Nursing Home
- National median daily rate for semi-private room of $220
- National median daily rate for private room of $250
- National median annual rate for semi-private room of $80,300
- National median annual rate for private room of $90,000
Many families are ill prepared for the financial burden of long-term care because they never plan on needing it. A survey of 1,000 adults aged 40 and older found that only 35% put away money for long-term care. Jennifer Agiesta, director of polling, said that many “people tend to guess wrong when they think about how much long-term care will cost them.”
Experts recommend setting aside $230,000 of your retirement savings for long-term care costs, a staggering amount considering the average 65 year old has $75,277 saved in their 401k or other retirement account.
How Can You Pay for Long-Term Care?
Unfortunately, Medicare does not pay for long-term care. Most of the necessary personal care (feeding, bathing, dressing, grooming, toileting, etc.) provided by professional caregivers are not covered by this social insurance program. Medicare only pays for home health care for a short term period of time at a skilled care nursing home, hospice care, or for home care if your loved one meets these conditions:
- They had a recent hospital stay of at least three days
- They are admitted to a certified Medicare nursing home within 30 days of their hospital stay
- They require skilled care such as skilled nursing services, physical therapy, or other types of therapy
What about Medicaid?
Long term care services are covered by Medicaid but your loved one must have little to no assets and low income in order to qualify. In some instances, Medicaid can cover home care while others may require your loved one to receive their care at a nursing home. If your loved one is ineligible, you can work with a lawyer to help transfer their assets in order to be covered by Medicaid. Keep in mind that there are asset transfer rules in place that can impose a time restriction on when your loved one can receive Medicaid benefits after selling property or give them away to family members.
For seniors who don’t qualify for Medicaid and don’t receive home health care services through Medicare, or need care beyond what Medicare covers there are a few options for financing long-term care:
- Long Term Care Insurance
- Life Insurance with a Long Term Care Rider
- Reverse Mortgage
Paying with Long Term Care Insurance
Long-term care insurance policies are usually completely separate from health insurance policies and cover the cost of home care, assisted living facilities, and nursing homes. Policies generally cover some or all of the costs associated with long-term care for a certain period of time. Long term care insurance must be purchased when your loved one is still relatively young and healthy, so it is not a last-minute option for financing care. Many people interested in long term care insurance policies purchase them in their 50s to 60s. As a requirement for most policies, insurance holders must be in good health and are not already receiving caregiver services.
If your loved one needs long term care assistance immediately, purchasing a new policy is most likely not going to beneficial due to high cost or difficulty getting coverage.
Long term insurance premiums vary based on these factors:
- How old was your loved one when they purchased their policy?
- How healthy was your loved one when they purchased the policy?
- What is the daily maximum amount of money that their policy will cover for long term care?
- What is the lifetime maximum amount that their policy will pay?
- How long will the coverage last when a claim has been made?
- Are there any additional benefits that their policy will cover?
Additional benefits that may increase premiums:
- Inflation Protection—This added benefit highly depends on the age of your loved one. The younger they are, the more important inflation protection is for them. Inflation protection safeguards them from the rising cost of care by increasing the benefit value by the rate of inflation.
- Nonforfeiture Benefit—Some plans offer a nonforfeiture benefit that allows your loved one to receive some of their benefits that they paid for even if they cancel or lose coverage. The longer they have been paying their premiums, the higher the benefit. Policies with nonforfeiture benefits usually have higher premiums.
Paying with Life Insurance
Some life insurance policies allow your loved one to add a long term care rider to their policy. For those who already have a life insurance policy, adding a long-term rider can be beneficial because it offers an accelerated death benefit that allows your loved one to get a tax-free advance on their benefit while they’re still alive in order to pay for the cost of care. While this can sound like an attractive option to have on their policy, it may also increase their monthly premium. If these conditions are met, your loved one may be able to receive a cash advance on their policy:
- Is your loved one terminally ill?
- Do they have a life threatening diagnosis?
- Will they need long term care services for an extended period of time?
- Are they permanently confined at a nursing home?
- Your loved one cannot perform certain activities of daily life (ADL) such as bathing, toileting, and eating.
Paying with a Reverse Mortgage
A reverse mortgage allows your loved one to draw on their home’s equity to pay for long-term care costs. Payment can be received as a lump sum, monthly, or a line of credit to pay for their long term care. With a reverse mortgage, your loved one is still pays property taxes, homeowners insurance, utilities, and maintenance of the home. There are no restrictions on how your loved one can use the money they receive from a reverse mortgage. When your loved one moves or no longer lives in the home, heirs are left with the remainder of the home equity after paying off the amount owed. You can view a list of pros and cons for reverse mortgages here.
Paying with Annuities
Your loved one can choose to make a single payment or a series of payments to their insurance company for an annuity that helps pay for long term care. There are two annuity options: 1) an immediate annuity and 2) deferred long term annuity. A single premium payment for an immediate annuity means your loved one receives a specified amount of monthly income for a designated period of time. With a deferred long term annuity, your loved one will have two sources of funding—one fund that is specifically for long-term care and another fund to use however they would like. It is important to note that this option is only available for seniors up to the age of 85.
For seniors who don’t haven’t purchased an insurance policy to cover long-term care, and don’t qualify for Medicaid they must pay for long-term care out-of-pocket. Unfortunately, full-time long-term care can be expensive and many people are unprepared to pay for the cost of care. Understanding the costs of long-term care before it's needed, and planning for the eventual need can prevent stress and ensure better care for your loved one. Paying out-of-pocket for long term care can be helpful for those not wanting to pay high insurance premiums or if they have already been disqualified from coverage because of a pre-existing condition.
How Can You Find Affordable Long-Term Care?
If you're interested in hiring a caregiver directly but don’t know where to start, eCaregivers is an online community that connects you with local, pre-screened caregivers. You can search for caregivers who live and work in your neighborhood with your zip code. Unlike your local classifieds sections, private caregivers are able to create an online profile of their experiences and qualifications. eCaregivers also lets interview as many caregivers as you would like—something that most agencies won’t allow.
Using eCaregivers, you can find private caregivers with rates starting at $10-$14/hour for care, versus $20-$24 with an agency, helping you save thousands of dollars in a year while still ensuring quality home care for your loved one.
All of the caregivers on eCaregivers have passed a criminal background check so you have a peace of mind that you’re hiring a vetted caregiver for your loved one.
About the Author
Peter Kang is a writer for eCaregivers. He is inspired by his caregiver experience with his late grandfather and role model, a Korean War veteran, to help families find affordable care for their loved ones. Follow Peter on Facebook and Twitter.