Long-Term Care — Covering the Costs of Medical Expenses
Every retirement plan should include provisions for long-term care insurance.
Paying for long-term care
Most senior care facilities charge on a month-by-month basis, but some require a longer-term lease. Assisted living is often less expensive than home health care, while skilled nursing homes are typically the most expensive.
The majority of assisted living facilities use a tiered pricing model with bundled services — residents requiring the least amount of assistance pay the lowest rate. According to the National Investment Center Investment Guide 2010, the median rate for monthly rental in an assisted living community was $3,326 while the median rate of skilled nursing was $7,001 per month.
Long-term care insurance and other options
Long-term care insurance pays a fixed dollar amount for assisted living, skilled care and in some cases in-home care. However, depending on the policy purchased and the level of care needed, it may not pay the total cost incurred. Prices of these policies vary, so it’s wise to shop around. The premium you pay will depend on the policy terms, current health and how old you are when you purchase it — the longer you wait, the higher the premiums may be. Some policies offer lifetime coverage, while others provide coverage for a specified number of years.
While a growing number of Americans are purchasing long-term care insurance, the majority still rely on a combination of personal savings, Social Security, pensions and government benefits to pay the costs. For many seniors, paying for long-term or skilled care requires liquidating significant assets. Often, seniors sell or rent their home to pay assisted living or nursing home costs. Another option gaining in popularity is the reverse mortgage, though it requires one spouse to remain in the home. This option lets the homeowner convert a portion of their home equity into cash. There are many rules for eligibility, and the pros and cons should be weighed carefully.
Another option for some is to borrow against cash value in a life insurance policy, though this will reduce the death benefit paid to survivors. Again, the benefits and disadvantages of this option should be evaluated thoroughly.
Medicare and Medicaid
Medicare does not typically cover costs fofr assisted living or nursing homes. However, the medical expenses incurred while at these facilities may be covered by Medicare, just as they would if the medical procedures occurred in a doctor’s office or hospital. Medicaid coverage for long-term care is sometimes available to low-income seniors or seniors with minimal assets and this varies by state.
If you are a U.S. veteran you may qualify to receive long-term care support through the Veteran’s Administration. Eligibility is determined based on need for ongoing treatment, personal care, and assistance, as well as the availability of the service in your location. Financial eligibility and other factors also apply. To learn more, visit the U.S. Department of Veterans Affairs website at http://www.va.gov/.
Planning for long-term care expenses
Every financial plan should include an assessment of long-term care needs. When it comes time to evaluate various long-term care options, it is crucial that you ensure adequate funding is available for as long asit’s needed. There are professionals available to help — your financial advisor is a good place to start. Other resources include:
- National Association for Home Care
- Visiting Nurse Associations of America
- Centers for Medicare & Medicaid Services (formerly known as the Health Care Financing Administration)
- American Association of Homes and Services for the Aging
- American Association of Retired Persons (AARP)
- Health Insurance Association of America
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