How Much Will Long-Term Care Cost?
Good Long-Term Care Planning is a Gift to Family

How Much Will Long-Term Care Cost?

The recent article from MarketWatch, “This is how much long-term care could cost you, and don’t expect Medicare to help,” reports that most people over 65 will eventually need help with daily living tasks, like bathing, eating, or dressing. Men will need long-term care assistance for an average of 2.2 years, and women will need it for 3.7 years, according to the U.S. Department of Health and Human Services’ Administration on Aging.

Many will rely on unpaid care from spouses or children, but over a third will spend time in a nursing home, where the median annual cost of a private room is now more than $100,000, according to insurer Genworth’s 2018 Cost of Care Survey. Four out of ten will choose paid care at home; the median annual cost of a home health aide is more than $50,000. Finally, more than 50% of people over 65 will incur long-term care costs, and 15% will incur more than $250,000 in costs, according to a study by Vanguard Research and Mercer Health and Benefits.

Note that Medicare and private health insurance typically don’t cover these “custodial” expenses. This means that such costs can quickly deplete the $126,000 median retirement savings for people age 65 to 74. People who exhaust their savings could wind up on Medicaid, the government health program for the indigent that pays for about half of all nursing home and custodial care.

People who live alone, are in poor health, or who have a family history of chronic conditions are more likely to require long-term care. Women face special risks, since they typically outlive their husbands and, as a result, may not have anyone to provide them with unpaid care. If husbands require paid care that erases all of the couple’s savings, women could have years or even decades of living on nothing but Social Security.

The earlier you start planning, the more choice and control you’ll have. Let’s look at some of the options:

Long-term care insurance. The average annual premium for a 55-year-old couple was $3,050 in 2019, according to the American Association for Long-Term Care Insurance. Premiums are higher for older people, and those with chronic conditions might not be eligible. Policies typically cover part of long-term care costs for a defined period, like three years.

Hybrid long-term care insurance. With life insurance or annuities with long-term care benefits, money that isn’t used for long-term care can be left to your heirs. These products typically require you to commit large sums or are paid in installments over 5 to 10 years, although some now have “lifetime pay” options.

Home equity. People who move permanently into a nursing home may be able to sell their houses to help fund the care. Reverse mortgages may be an option, if one member of a couple remains in the home. This type of loan lets them use their home equity. However, it must be repaid if the owners die, sold, or they must move out.

Contingency reserve. People with a great deal of investments could plan on using some of those assets for long-term care. Their investments can produce income, until there’s a need for long-term care, and then can be sold to pay for a nursing home or home health aide.

Medicaid spend-down. Those who don’t have much saved or who face a catastrophic long-term care cost that cleans out their entire savings, could wind up applying for Medicaid. Ask an elder law attorney about ways to protect, at least some assets for your spouse.

Learn how good planning can avoid the devastating costs of long-term care.

Reference: MarketWatch (July 19, 2019) “This is how much long-term care could cost you, and don’t expect Medicare to help”

Worried about a Spouse Needing Nursing Home Care?

The six-figure cost of nursing home care is worrisome for those who are married, when a spouse has to go to a nursing home. In this example, Tom has had some major health issues in the past year and Louise is no longer able to care for him at home. Good planning in advance can help a couple preserve assets in the event one of them needs nursing home care.

In this case, the couple live in Pennsylvania, where nursing home care statewide is $126,420 a year ($342.58 per day). The state has a Medical Assistance program that is a joint state-federal program that will pay for nursing facility care, if a person meets both the medical and financial criteria.

Tom has met one of the major Medical Assistance threshold requirements, because he is “nursing home facility clinically eligible,” which means that a doctor has certified that due to illness, injury or disability, Tom requires the level of care and services that can only be provided in a nursing home.

What will happen to their assets?

In 1988, Congress passed the Medicare Catastrophic Coverage Act, which created a process of allocating income and resources between a spouse who needs to live in an institutional setting and the spouse who can continue to remain in a community setting.

Tom and Louise’s resources are divided into two buckets: one that is exempt and the second that is non-exempt.

The family home, care, and cost of a pre-paid funeral, if that has been done, are exempt or non-countable assets.

Everything else, whether they own it together or individually, is considered non-exempt. In Pennsylvania, Louise’s IRA is the exception. However, that is not the same in every state.

Louise is entitled to keep one half of what they own, with a maximum of $126,420, as of January 1, 2019. This is her “community spouse resource allowance.”

Anything else they own, is used to pay for Tom’s nursing facility care or purchase a very select group of “exempt” assets, like a replacement car or the cost of a prepaid burial.

They would have needed to give away their resources, at least five years preceding an application for Medical Assistance. If they have given money away in an attempt to preserve some of their assets, that would have changed the timeline for Tom’s being eligible for care.

Louise needs income to live on, so that she is not impoverished. She is entitled to a monthly minimum maintenance needs allowance of $2,058 and a maximum needs allowance of $3,150.50. These numbers are federally adjusted and based on inflation.

The numbers that must be examined for Louise’s income are her Social Security benefits, Tom’s Social Security benefits, any pension either of the two may have and any other income sources. She can keep her income, as long as she does not go over a certain level.

Sounds scary? It is. This is why it is so important to do advance planning and have an ongoing working relationship with an attorney with experience in estate planning and elder law. There are changes over time to address the changing circumstances that life and aging presents.

Learn how Medicaid planning can help with nursing home care costs.

Reference: Pittsburgh Post-Gazette (April 29, 2019) “Married and concerned about one of you going to a nursing home?”

Should You Get Personal Care Agreement to Care for Mom?
Personal Care Agreement for Mom

Should You Get Personal Care Agreement to Care for Mom?

Using a personal care agreement to care for a loved one is a great way to get compensated for the effort while at the same time preserving the loved one’s assets. Families often expect to care for relatives, thinking that it is part of their duty as a daughter or son, niece or nephew. Using a personal care agreement often makes sense, says AARP Bulletin’s article “Creating a Personal Care Agreement as a Family Caregiver,” if the amount of care is a few hours here and there, or paying a bill or running an errand or two.

However, what happens when a parent needs far more intensive care, like having their meals prepared, monitoring medications and help with daily activities of life like bathing, getting dressed and walking within the home?

It costs about $170 per shift for home maker or health aid services. Few of us are able to write that check.

Some children move in with their parents in an effort to make caring for them easier. That’s when the pay issue often arises. The caregiver may have to give up opportunities for their career, Social Security earnings and the chance to add to their own retirement savings. When the parent dies, the caregiver may find themselves without a home or a job. In this case, payment of some kind seems fair. That may also be true for adult children who take an ailing parent into their home.

The problem is, older people with limited income may not have the ability to pay for home care. There are public programs to pay for caregivers, including a family member, although not a spouse. Every state has different programs. Some long-term care insurance policies may cover a portion of home care costs. If these options are not available, then the family may have to decide whether to pay.

Here is one scenario where things go wrong fast: a daughter moves into her mother’s house, who pays her without discussing it with any other members of the family. When siblings find out, there’s a big family fight. If there is no written agreement, the payments may be considered gifts from Medicaid’s perspective, and could delay a parent’s eligibility for nursing home coverage.

The best option is to have a financial agreement in place. The questions to consider include:

  • Should the room and board be included as part of compensation, if the person is living with the aging parent?
  • Will the family pay for the caregiver’s health insurance?
  • Should there be time off for the sibling who takes the parent into their home?
  • What can the other siblings do to help?

The paid caregiver family member is an employee of the parent, and their income needs to be reported as taxable. The parent may need to file paperwork and pay employer taxes or hire a company that can manage the bookkeeping. The use of a contract and forms may feel overwhelming at first, but there will be many difficulties in the future avoided by doing this right the first time.

Learn more about the benefits of a personal care agreement.

Reference: AARP Bulletin (March 5, 2019) “Creating a Personal Care Agreement as a Family Caregiver”