How to be aware of long-term care

Each decade, American lifespans increase. Today, two million people are 90 years of age and older, and that population is expected to quadruple by 2050.1

While most welcome the chance at longer life, fewer are ready to deal with the ailments and chronic conditions that often accompany the latter years. That’s why understanding long-term care services is an important part of planning for the future.

The majority of people 90 and older have some type of disability or chronic condition.1 The cost of care for these people can be staggering. A private room in a nursing home costs around $97,000 a year (national average). For those who prefer to receive care at home, the national average hourly rate for a home health aide is nearly $22 per hour, while skilled home health care rates are significantly greater, with the national average fee for a registered nurse at $79 per hour.

As eye opening as these figures can be, there are several other important factors to consider when thinking about long-term care.

Don’t count on Medicare

Many retirees are surprised to learn that Medicare, the health insurance program for those 65 and older, doesn’t pay for nursing homes or in-home care. Medicare pays for only a few, limited services, such as:

Skilled nursing care

The program will pay for rehab in a skilled nursing care facility following a hospital stay. For example, if you fell and broke your shoulder, you would be entitled to a stay in a facility that helped you recover so that you could go back home and continue living independently. Medicare only covers up to 100 days of this type of care.2

Home health care

If you need short-term care while you recover from an illness or injury, Medicare will cover the cost of having nurses or therapists come to your home. However, this is not around-the-clock care and is limited to 35 hours per week, though your doctor can help you qualify for more. It should be noted that Medicare does not cover the largest aspect of long-term care, which is custodial care to help with bathing or dressing.

Hospice

Medicare covers end-of-life care for a terminal illness. You are eligible if you are not being treated for your illness, and your doctor must certify that you have no more than six months left to live. 

Medicaid will pay, but only sometimes

Medicaid, the government health insurance program for low-income people, does cover long-term care services. However, eligibility requirements vary from state to state, restricting access for those with income and assets above their state’s threshold. This often requires individuals to spend down their assets before qualifying, potentially impacting the standard of living of a spouse and legacy plans.

The program is careful in ensuring people aren’t sheltering money elsewhere, so there’s now a five-year “look back” period. In other words, if you transfer assets to a trust or to your children, you cannot apply for government aid for at least five years.

Additionally, only certain nursing homes accept Medicaid patients, so you might be limited in which facility you can go to.

Pay out-of-pocket

Paying for long-term care on an as-needed basis is how some people plan to address this expense, or in combination with the other options. However, nearly 75 percent of people significantly underestimate the costs associated with long-term care.

Long-term care can be a difficult topic to discuss. A majority of people don’t believe they’ll have a long-term care need in their future, and the thought of aging can be unsettling. But if it’s left unaddressed, families may need to make some very rushed and expensive decisions. Advisors estimate that clients who experience a long-term care event and don’t have protection in place could draw down their retirement savings at rates two to three times faster than planned. 

While it’s true that most long-term care needs begin in the home with care provided by family or friends, the number of people using nursing facilities, alternative residential care places, or home care services is projected to increase from 15 million in 2000 to 27 million in 2050.

Plan ahead for long-term care by determining where you’d like to receive care if you need it and how you would pay for the care so that you can spend your latter years enjoying life with dignity and not worrying about how you’ll get the care you need.

1"Census Bureau Releases Comprehensive Analysis of Fast-Growing 90-and-Older Population." United States Census Bureau. November 17, 2011. http://www.census.gov/newsroom/releases/archives/aging_population/cb11-194.html

2U.S. Department of Health and Human Services. Accessed February 4, 2016. http://longtermcare.gov/medicare-medicaid-more/medicare/