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How Will I Pay for Long-term Care?

Posted on: May 23rd, 2016
It's pretty well established that long-term care costs are a growing threat to everybody's assets. So how do people pay for long-term care when it's so expensive?

First, although there is always a chance you will not need long-term care due to a sudden death, the chances are much higher that all of us will need some level of care. Statistics show that 70% of those over the age of 70 will need some type of long-term care. Statistics also show that, on average, people reaching the age of 65 will live 19.2 more years. So if you are 65 years or older, chances are very good that you will need long-term care at some point in your life. The problem is we really do not know how much long-term care will be needed in the future, so all of us should consider our options instead of burying our heads in the sand.

The growing trend to extend life with modern medical treatment only increases the likelihood of long-term care. Generally, the cost of long-term care is paid for in one of the following five ways (or a combination thereof):

1. Self-pay from your own assets (aka Private Pay)
2. Medicare
3. Long-term Care Insurance
4. Veterans Benefits
5. Medicaid

Each of these options merits its own separate discussion, and some areas need significantly more discussion than others, but we'll do our best to briefly explore each of these.

1. Self-pay / Private Pay

Self-pay or private pay for long-term care will always be an option as long as an individual has assets left. Unfortunately, many people do not have enough assets set aside for the level of care they may require. On average, nursing home care in the KC area is over $5000/month. In today's environment, where long-term care insurance alternatives are less attractive than previous years, individuals have to consider if they are better off segmenting part of their own wealth for their eventual long-term care needs. When you are private paying for long-term care, you have many more options for care, but you also may be paying a higher rate than a Medicaid rate. Self-pay will continue to be a part of most long-term care solutions and the key question is how long private pay can continue before the money runs out.

2. Medicare

The use of Medicare for most long-term care is very limited. There are hospice alternatives that can be included within Medicare, but typically Medicare will stop paying somewhere within the first three (3) months of care. Although there are court cases conflicting with this practice, generally care providers stop care under Medicare when the individual stops rehabilitating. Once the individual moves from rehabilitation to long-term care, in the opinion of the care provider, then Medicare payments usually stop. There are groups attempting to get more long-term care included with Medicare, but this movement involves a complicated group of legislative items and conflicts. Basically, individuals should not expect Medicare to pay for long-term care unless hospice is involved.

3. Long-term Care Insurance

Long-term care insurance has evolved over the years and will continue to evolve. Unfortunately, many of the early providers of this insurance have left the business. The cost of providing long-term care insurance has become expensive under the earlier policies, and most providers have either left the business or significantly reduced their exposure with current policy offerings. As an example, most policies are capped at a total dollar level and these typically end within three (3) years. There are plenty of complexities with long-term care insurance and this insurance can provide significant benefits, but the industry has reduced their exposure to the high costs of long-term care. Additionally, the industry is continuing to integrate their life insurance products with long-term care options. The general concept of either using your death benefit upon your passing, or using it while you are living for long-term care, is the growing trend in this industry. We encourage everyone to consider their long-term care insurance options, and we work with plenty of advisors well trained in this complex marketplace.

4. Veterans Benefits

Veterans benefits (VA) include a wide range of topics, but VA Aid and Attendance, also commonly known as VA Pension, is an often overlooked option for long-term care. Although the qualification process can be frustrating, this benefit can pay a married vet over $2,100/month tax free to assist with the cost of long-term care. Additionally, a surviving spouse of a qualifying vet can receive over $1,100/month to assist with their long-term care. If you know of a retired vet struggling to pay for their long-term care, please have them call our office to see if they qualify for VA Aid and Attendance. They do not have to be career military to qualify. Service of of just 90 days with 1 day during a declared war time can qualify them for benefits earned in service to their country. There are multiple steps involved, and we will review carefully with the veteran and their family. This benefit has provided many families significant value over the years, and there is no payback requirement for this benefit.

5. Medicaid

Finally, while Medicaid is often considered the option of last resort for long-term care, government statistics show that 70% of people in nursing homes rely on Medicaid to pay for their care. It is important to realize that you've paid for Medicaid over your lifetime, so why not use it when you need it? Medicaid planning is complex, but also well worth a client's time when it is appropriate. Medicaid planning generally falls into two categories: proactive planning and crisis planning. Proactive Medicaid planning usually targets protecting major assets by asset restructuring with an understanding that Medicaid will have a 5-year look back period for all gifts. For instance, if a farmer (or landowner) wants to protect the family property, there are proactive steps we can take with the client to protect these assets. Crisis Medicaid planning is the more common form of Medicaid planning, though it can be less effective than Proactive Medicaid planning. Crisis planning is geared to protect assets whenever possible, and there are many different ways to assist an individual or couple when the need arises.

The topic of Medicaid planning is much too complex for this article. It is much better to hear a client's situation in our office and then work through the different options with them. This we way can more thoroughly explore their Medicaid options and better assist them in their time of need.

We encourage all of you to take the time and create a plan to pay for long-term care. This comprehensive planning is often delayed until the options become very limited. The earlier you can start your planning, the more options you will have available to you and your family. We commonly work with advisors, CPAs and others to create a coordinated plan unique to the needs of the individual.

​How will you pay for your family's long-term care needs?

Give our office a call at 913-345-2323 to schedule your "no-cost" consultation today.

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