Thinking About Long-Term Care Costs

Thinking About Long-Term Care Costs (Part 1)

There are many uncertainties in modern life, but with each passing day, there’s one unavoidable fact - like it or not, we’re all getting older.  Whether you’re a “Gen-Xer”, a “Baby Boomer” or a member of “the Greatest Generation,” if you’re reading this post, it’s very likely that you’re starting to think about aging and the health care costs that go along with it.  Even if not for yourself, if you’re on the younger end of the spectrum, you may be faced with thinking about the care of your parents.

The good news is that advances in medicine and technology have made it possible for many more of us to live to a “ripe old age” (although I don’t know how comfortable we may be about being compared to fruits and vegetables).  However, the flip side for many people is that living longer often leads to needing long-term care.

According to the Commonwealth of Massachusetts Division of Insurance, “long-term care” refers to “services aimed at helping people compensate for limitations in their ability to live independently.  Long-term care should meet your medical needs, as well as your social, financial and housing needs.  It can range from assistance with household chores to assistance with ‘activities of daily living’ to highly skilled medical care.  Long-term care services may be provided in a variety of settings such as the home, community sites (adult day care centers) or nursing homes.”

Given that definition, we can all understand how we our loved ones will probably need long-term care at some point.  In fact, some of us may already have family members who do.  The big question though, is not whether long-term care is needed, but rather, how will we pay for it?

No doubt about it, the costs of long-term care are high, and only getting higher.  This is especially true in the case of nursing home care, which is the most expensive type of care.  In 2007, according to the Massachusetts Division of Health Care Finance and Policy, the average “private pay” patient in a nursing home in Massachusetts was approximately $275 per day, or $100,375 per year. For 2013, the average cost had increased to $345 per day, or $125,925 per year!  It is expected that these costs will continue to rise at the rate of 4% per year and remember, that’s an average.  While some facilities charge less, there are some that charge more!

Those are some scary numbers.  Some people have the ability to cover these costs themselves from savings, pensions or other investments.  However, many of us are not that fortunate and would not have the funds necessary to pay for a sustained period of long-term care.  As a result, many people need to rely on government programs, private insurance, or a combination of both.

Government Programs Have Their Limitations

Medicare – Many of us are familiar with Medicare, which is a health insurance program for persons aged 65 or older that is funded by the federal government.  There has been much discussion and debate in the national news over the past few years about Medicare’s viability and prospects but for the foreseeable future, it is here to stay. However, Medicare pays for very little in the way of long-term care costs and there are strict and limited eligibility requirements.  Also, Medicare coverage for personal care services such as dressing and bathing is very limited.  In addition, the patient must often pay co-pays for services.

 Medicaid – Medicaid, known in Massachusetts as “MassHealth” is a combined Federal and State welfare program.  It can pay for nursing home care and some home and community-based services, but there are strict limitations on how much income and assets a person can have in order to qualify.  There is more leeway for married couples, but if a person is single, they can only have $2,000 of “countable assets.” A primary residence standing in the patient’s name is not “countable” and would not prevent someone from qualifying for MassHealth, but the state would still place a lien on the property for the amount of benefits paid, and this lien would have to be paid after the recipient’s death.  Very often this results in all of the value from the sale of the home going to pay the lien, with nothing left to pass on to children or other heirs.   In addition to the asset limits, there are strict income limits as well.  In 2013, in most cases, you cannot have income over $923 per month to qualify for MassHealth Standard.

Is a Long-Term Care Insurance Policy Right for You?

If you are not among those wealthy folks who will able to afford to pay for long-term care privately, and you are also concerned that you may not be able to qualify for Medicaid, or are concerned that federal funds might not be available when you need them, then Long-Term Care Insurance (“LTCI”) could be the right middle-ground solution.  For many people, LTCI can be a very effective way of protecting yourself and your assets against the potentially devastating costs of long-term care.  If purchased properly, LTCI can help avoid exhausting your life savings and also can help maintain access to the widest variety of quality health care options.  It can also help avoid having to rely on financial assistance from family or from Medicaid.

However, LTCI is not right for everyone, and there are many different types of policies, some of which offer better protection than others.  If you (or your family members) cannot afford the premiums, have limited assets, have no income other than Social Security or Supplemental Security Income (SSI), or have often have trouble paying for basic necessities such as food, utilities and medicine, you should not consider buying LTCI.

 In Part 2 of this article, I will discuss LTCI in greater detail and give you some points to consider when deciding if LTCI is a good option.  As I said at the beginning, most of us don’t like to think about getting older and needing long-term care, but for many of us, it will be a reality someday, or, for people with elderly parents, it may be a challenge facing you very soon.  Stay tuned…

Andy Schwartz is an attorney concentrating in estate planning, elder law, special needs planning and real estate law. He is a member of the Massachusetts Chapter of the National Academy of Elder Law Attorneys and the Real Estate Bar Association of Massachusetts.  He can be reached at ahs@andyschwartzlaw.com or at (508) 587-6000 with questions or comments, or visit his website at www.AndySchwartzLaw.com.

The information contained herein is intended for informational purposes only and is not legal advice, nor is it intended to create an attorney-client relationship. For specific legal advice regarding a specific legal issue please contact Attorney Schwartz directly.