Nursing homes, assisted living, wheelchairs, walkers, prescription copays—the costs add up.
The Alzheimer’s Association estimated end-of-life care costs in 2016 were between $217,820 and $341,651.
Sometimes, otherwise healthy loved ones need a short dose of care as they recover from an acute medical episode like a broken leg. Other times a fall triggers a path of steady decline with cascading assistance needs. Skilled nursing or assisted living can become necessary, which can be expensive.
If your senior’s health is faltering, costs not covered by insurance add stress to an emotionally charged situation.
There are three key “aging shocks” that surprise families:
- uncovered costs of prescription drugs,
- the costs of medical care that are not paid by Medicare or private insurance,
- the actual costs of private insurance that partially fills in the gaps left by Medicare, and the uncovered costs of long-term care.
–Health Services Research: The 2030 Problem: Caring for Aging Baby Boomers
For the estimated 7 million individuals who provide long distance care, actual out of pocket expenses amount to almost $5,000 per month. For caregivers who have, or are considering leaving the workforce to care for an ailing parent, the costs are even greater—over $650,000 in forfeited salaries, benefits and pensions.
- 70% of adults who are 65 years old will require some level of long-term care throughout the rest of their life,
2018 – U.S. Department of Health and Human Services
- 2 years: Average number of years that individuals age 65 and older will have a high long-term care need during their lifetimes.
- $350,174: The average lifetime cost of care for an individual who has dementia,
2018 – Alzheimer’s Association
- 1 in 4: The number of adults who are 45 years old or older who are financially unprepared for long-term care expenses,
2015 – AARP
- 13% percent of adults will pay at least $150,000 in lifetime long-term care expenses out of their own pocket.
2018 – U.S. Department of Health and Human Services
Discover hidden ways to save money
You can decrease the personal and economic costs of caregiving through careful research and planning. Think about what happens when you go to the grocery store with and without a shopping list. You will feel much better when you know your options and develop back-up plans before you absolutely need to help your senior make a long-term care decision.
Whether you are currently faced with the dilemma of how to pay for long-term care or are planning for the future, these are the steps to systematically approach the challenge:
Review your senior’s assets
Determine potential long-term care cost
Evaluate ways to cover long-term care
Step One: Review Your Senior’s Assets
- Identify all sources of income and expenses for your senior by filling out this Asset Calculator. It will help you determine their eligibility for Medicaid.
- Find and review insurance policies, including life, medical, home, car, etc.
- Find a financial professional to advise you on managing your senior’s assets. The Senate Committee on Aging recommends looking for someone with a financial gerontology certification; however the Securities and Exchange Commission does not endorse any financial advisor titles, like elder specialist.
- Ask your employer if they offer financial counseling services.
Step Two: Determine potential long-term care cost.
You can estimate the cost of your senior’s long-term care using this online calculator. When we researched options for my father, this calculator was pretty accurate for where we live in California.
Step Three: Evaluate ways to pay for long-term care.
There are three options to pay for or reduce the cost of long-term care:
- government programs,
- insurance programs or
- personal assets
We will start with reviewing government programs to find out which costs they cover.
Find out what Medicare or Medicaid covers.
Medicare only pays for long-term care if skilled services or rehabilitative care are required:
- In a nursing home for a maximum of 100 days, however, the average Medicare covered stay is much shorter (22 days).
- At home combined with skilled home health or other skilled in-home services. Generally, long-term care services are covered for only for a short period of time.
- Does not pay for non-skilled assistance with Activities of Daily Living (ADL), which make up the majority of long-term care services.
Medicaid (program name varies by state):
- Does pay for the largest share of long-term care services, but to qualify, your senior’s income and assets must be below a certain level and they must meet minimum state eligibility requirements.
- Ask about federal or state funds available to pay caregivers by contacting the Eldercare Locator. Reach them online or by calling 800-677-1116, Monday – Friday, 9am – 8pm EST. Find your local office number on their website by adding your zip code. They can also inform you about other local caregiving services, like those provided under the National Family Caregiver Support Program.
- Call your State Health Insurance Program (SHIP) for FREE advice about Medicare programs. Find the number for your state.
Time to review your senior’s insurance programs.
- If your senior has long-term care insurance, call your senior’s long-term care insurance provider to ask about guidelines for paying a caregiver.
- If you are wondering if they should get long-term care insurance, check estimates with this online calculator. Advanced age and physical health can affect one’s ability to qualify for long-term care insurance.
- If your senior has life insurance, call your senior’s life insurance provider and ask about the following options.
- Ask about converting life insurance to a Long-Term Care Benefit Plan Account. By exchanging a life insurance policy for a long-term Care Benefit Plan, the benefits go toward long-term care including assisted living, home health care, and nursing homes. Benefits are deposited into a FDIC-insured benefit account that follows federal and state banking regulations and is held by a nationally chartered bank and trust company. The benefit payments are then made directly to the health care facility on a monthly basis.
- Ask about an Accelerated Death Benefit, in which your senior would receive a tax-free advance on the life insurance death benefit while they are still alive.
- Ask about the present value of the policy and if it is an option to sell it to pay for long-term care.
- Ask about selling the policy to a third-party, called a viatical settlement. This option is only available if the insured is terminally ill with a life expectancy of two years or less.
Time to review their personal assets.
- If your senior owns a home, search for an authorized reverse mortgage counselor in your state. A reverse mortgage is a special type of home equity loan that allows you to receive cash (to pay for long-term care) against the value of your home without selling it. There are no restrictions on how you spend the money and you can receive it monthly or in one lump sum. You have to be 62 or older. Here is a helpful Consumer Financial Protection reverse mortgage guide.
- Call a financial advisor and ask about a charitable remainder trust. This trust allows you to use assets to pay for long-term care services while contributing to a charity of their choice and reducing your tax burden at the same time. You can set up the trust so that they receive payments from the trust to use for long-term care services while they are alive.
- Talk to your employer about covering your senior’s expenses pre-tax on a Flexible Spending Account plan.
Find more answers to your long-term care questions with the help of a Digital Social Worker. Step-by-step you will uncover more answers to pay for your senior’s long-term care so it doesn’t dramatically affect your own accounts.
May you have peace at all times in every way as you help your senior in their waning phase of life.
Debbie McDonald is the Founder of Ways & Wane, an online platform that helps you help your aging parent. She lives in Northern California with her husband.