Genworth, an insurance company that sells long-term care insurance, recently concluded their annual report surveying over 15,000 assisted living facilities, nursing homes and other long-term providers across the country. The report found that the median cost for a private nursing home room has risen from $87,600 in 2014 to just over $91,000 per year. While costs vary widely from state to state, the cost of care in a nursing home has risen at twice the rate of U.S. inflation in the past 5 years.
Much of the aging population believes that Medicare will cover these expenses. Not so. “Medicare does not pay the largest part of long-term care services or personal care – such as help with bathing, or for supervision often called custodial care.” Medicare will pay for a “short stay” if the stay is following a hospital stay of at least three days, the individual is admitted to a Medicare-certified nursing facility and the individual requires “skilled care,” as in physical therapy or nursing services (up to 100 days, although Medicare will only pay 100% for the first 20 days, then the individual must pay a co-pay, currently $157.50 per day). Medicare will not cover long-term care when an individual is suffering from memory impairment or a degenerative disease that impairs the individual’s ability to care for themselves, i.e. bathe, get in and out of bed, etc. Medicare will pay for hospice care, only if one is expected to live less than 6 months—if you have a prospect of a year, you’re on your own. The bottom line is Medicare is not going to cover long-term care in a facility, nor will they cover around-the-clock care at home.
So where do you turn? Long-term care insurance. The difficulty with this is the expensive premiums if you wait too long. The policies can cost upwards of $3,000 per year but max out at a total benefit of $164,000 with a daily benefit allowance of $150 for 3 years. This can help offset the Medicare premium following a hospital stay.
In the event long-term care insurance maxes out, the final option in long-term care is Medicaid. It’s estimated that Medicaid pays for more than half of long-term care throughout the country. However, you must be eligible for Medicaid in order to qualify for assistance, which, in addition to other requirements, has a “resource limit” of $2,000 (although homes are exempt from this calculation). This has led to many elderly individuals depleting hundreds of thousands of dollars in a few short years in order to cover the expense. Then, when they are down to their last $2,000, Medicaid will assist them. These now impoverished individuals have no means for additional necessities aside from what the government offers through social security, disability, Medicaid, food stamps and other state government programs. Additionally, Medicaid will seek reimbursement from the individual’s estate after their death, including their home, in some instances.
This is one of the many reasons proper, and early, estate planning is so crucial. With proper planning, an aging client can align assets in the event of an illness or hospitalization ensuring that:
(1) They will have someone they trust making decisions for them, their previously designated health care agent;
(2) They will have the proper long-term care insurance to assist in covering the cost of long-term care, in the event it’s necessary; and
(3) They will have safeguards in place so that if they require Medicaid assistance, depleting all of their resources is not required.
However, in order for the estate plan to be effective, it must be structured early and prior to the onset of illness. Each family has different goals which they hope to accomplish. We can work with you to set up the most effective estate plan to accomplish you and your family’s goals.