Dealing With The High Cost Of Long-Term Care!

How To Deal With Soaring Costs

Soaring Costs of Long-Term Health Care!

According to the Long-Term Care advisory center, over 1/2 of all Americans will spend some portion of their lives in a long-term care facility, be it a nursing home or hospital. Yet on a national average, the costs of long-term care keep going through the roof.

This article is designed to provide certain basic information about Long-Term Care: why you should consider it, what it costs, and what options do you have to pay for it if you need it?

How Long is the Average Stay at a nursing home or assisted living facility?

"On average, a 65-year-old today will need some form of long-term-care services for three years, according to the National Clearinghouse for Long-Term Care Information."

20% will need long-term care for at least 5 years. This is especially important to keep in mind if your family has any history of long-term disabling diseases like Parkinson's or Alzheimers or if you or a family member may be susceptible to conditions like stroke or elder frailty that might require a longer stay in such facilities.

About 1 in 3 won't need any form of long-term care.

Of course, as they age or their disability becomes more severe, many patients will progress from non-skilled in-home care which may be part time, to an assisted living facility where full-time care is available, to finally a nursing home. Naturally the costs of these three different types of long-term care will differ widely.

What Is the Cost of Different Types Of Long-Term Care?

Studies have shown that the average cost of a nursing home in 2008 could exceed $194 per day, or over $70,810 a year for a semi private room.

"In 1994, 7.3 million Americans needed long term care (LTC) services at an average cost of nearly $43,800 per year. By 2000, this number rose to 9 million Americans at nearly $55,750 per year. It's currently near $75,000 per year. By 2030 those needing LTC will skyrocket to 23+ million Americans, with projected, individual long term care costs reaching $300,000 annually per individual!"

Nationwide, a private room in a nursing home can exceed $79,000 a year or $217 a day depending on what area of the country you live in. Nationwide, nursing home costs have risen 7% in the past 2 years and over 30% in the past 5 years.

In Colorado where I practice law, the costs are a little higher than the national average, as they may be in your state:

In Colorado, a private room in a nursing home currently costs, on average, $85,410 a year; assisted-living centers cost $38,400 a year; and a Medicaid-certified home health care aide costs $82,400 for 44 hours a week for a year, according to a survey done by Genworth Financial, a life insurance company.

In 10 years, those costs will be much higher. Genworth predicts that by 2019, a private room in a nursing home will cost $139,000 a year, assisted-living centers will cost $62,550 a year and a Medicaid-certified home health care aide will cost $134,000.

Of course many seniors who do not need full-time nursing home care will choose to remain in their own home for as long as possible with a home health care assistant. As noted above however, if they need a medicaid certified aide, the cost is astronomical (currently $82,400/ yr. in Denver). Non-professional health care workers are cheaper (ave. around $20/ hr.) but these are better classified as part-time helpers. (Note to self: Consider giving up law practice if I can earn $134,000 a year as a medicaid certified home health care aide)! ; ^ )

Seniors who need more care than a part-time worker or family member can provide may then graduate to an assisted living facility. Unfortunately, in the last two years, the rising costs of Assisted living facilities have exceeded the increase in nursing home care costs, rising to a nationwide average of $106 per day, or around $39,000 per year.

There was an average of a 15% increase in rates for the assisted living facility that provide care for Alzheimer's and dementia patients.

In -home care has had the smallest increase rate of all the service providers. The rate of in-home care has had an increase of 5% over the past two years and only 17% over the past 7 years.

The average cost for a certified nursing assistant providing in-home care is $21 per hour. The services provided by a certified nursing assistant are bathing, dressing and care provided under the supervision of a register nurse. These services are ordered by a physician and generally covered by insurance. These services are only provided intermittently and for a limited amount of time.

A Good Video Explaining the Cost of Long Term Care!

How Do I Pay For All This?

Does Medicare Cover These Costs?

Bottom line: No. Medicare will provide up to 100 days of long-term care coverage IF you've been hospitalized for at least 3 days and a doctor certifies that you need needing skilled-nursing care. If you need in-home care or institutional care for a disease like Alzheimers and do not require hospitalization, then Medicare will not cover your long term care needs at all.

If you've been hospitalized for 3 days or more and receive the doctor's certification, then Medicare will cover 20 days care for free, with up to an additional 80 days with a co-pay amount of $133.50 a day or around $4,0000 a month. After that, you must wait 60 days before re-admission to a hospital stay of at least 3 days before you will again be eligible for another period of Medicare payment for your rehabilitative care. The care can be in a nursing home, home care, or in a hospice. There are slightly differing requirements for each type of care which you should review if you are wondering if you qualify for Medicare payments for long term care. Generally, Medicare is not generally the answer to long term care needs for most people.

What about Medicaid?

NOTE: This area is VERY complicated and varies state by state. Unlike Medicare which is a federal program, Medicaid is a partnership between the States and Federal Government, which means you need to check the rules in your own state for eligibility requirements, etc. The federal government sets Medicaid income and asset eligibility requirements, but the way states implement these varies and there may be waivers and other details will differ depending on your state.

You should speak with a knowledgeable attorney or health-care professional in your state for details about your situation.

Generally, nationwide, Medicaid does cover long term care in a nursing facility. The care covered is generally room, board, nursing care, and social activities in the nursing facility.Medicaid generally does not cover home care, with some exceptions.

However, unlike Medicare, Medicaid is "means tested" Only the very poor will qualify. Persons with assets over $2,000 for an individual or $3,000 for a couple may be subjected to a period of "Medicaid ineligibility" until the "spend down" their assets to the required levels. And even very poor persons may not qualify if they have given away assets or otherwise have violated (even quite innocently) a long series of arcane federal or state rules.

There are very strict qualification guidelines designed specifically to prevent middle-class homeowners from qualifying for Medicaid long term care and subject those who do to "asset recovery" whereby the government will seize their assets, generally when a non-institutionalized spouse dies. In 2006 Bush signed the Deficit Reduction Act of 2005 which sought to limit Medicaid costs by shifting the cost burden onto individuals. The draconian provisions of this law were designed to severely limit Medicaid long term care eligibility.

The worst change and the one which causes the most hardship is that there is now a 5 year "lookback period" -- the state will look for any asset transfers the patient may have made within the last 5 years (gifts to family members or charity, even assets given during a period when they had no medical condition and no reason to think they might need Medicaid in the future)!

Example: Grandfather and Grandmother each gives $12,000 a year to their two grand-daughters for college expenses. Four years and eleven months later one of them needs Medicaid long-term care. They qualify, but are ineligible for a period of months or years because of the gift they gave all those years ago, when they had no illness and did not anticipate needing long-term care!

This law SERIOUSLY needs some changes by Congress!

What Is Medicaid Long-term Care?

The nursing home program portion of Medicaid is called “Institutional Care Program”, (or “ICP”). Persons eligible for ICP receive financial assistance for the costs associated with residing in "skilled nursing facilities" (nursing homes).

Generally speaking, the costs of an assisted living facility will not be paid by Medicaid; although a limited Medicaid waiver program and a “diversion” program may provide permit some otherwise eligible residents to qualify. The patient is usually required to cover the cost of living at an assisted living facility out of their own pocket.

Once an individual meets eligibility requirements for Medicaid long term care, his or her total gross monthly income is paid to the facility, less a personal needs allowance ($35) and any income permitted to be kept by a spouse living at home.

Medicaid will then pay for almost all costs, including room and board, medications and supplies. Laundry and hair care are not covered.


What Other Options Are There?

Basically, there are only 2 other options for long-term care for middle class persons who have too much income or assets to directly qualify for Medicaid.

1. Estate planning techniques designed to transfer assets out of the estate of the potential patient, so that they will qualify under Medicaid rules.

2. Private long-term care insurance.

Neither of these two methods is fool-proof and expert advice is essential in choosing what options you should use.

1. Estate Planning Techniques: For years Estate Planning Lawyers had a number of techniques whereby middle-class homeowners could legally remove assets from their estates in order to qualify for Medicaid, and yet avoid Medicaid "recapture" -- i.e. the state seizing their assets to reimburse the state for Medicaid expenses.These included various gifting techniques and Trust arrangements. The effectiveness of most of these planning techniques were eliminated by the Republican Congress via the Deficit Reduction Act of 2006. But, there are still some strategies available.

"Recapture" is considered undesirable, since it would of course prevent seniors from leaving their homes or other assets to their children. Instead the state would seize their assets, usually by filing a creditor claim as soon as their will was probated. This lien would reimburse the state for all amounts paid for Medicaid on behalf of the patient.

Obviously, this could be a LOT of money which would mean the state sells the patient's house and seizes all other liquid assets and the heirs are largely disinherited.

In most cases, "Recapture" takes the form of the state seizing the Medicaid patient's home as soon as he or she was no longer going to return to the home, or at latest after the death of a remaining spouse living in the home. With other minor exceptions, generally, in most states a medicaid patient can keep their home (worth less than $500,000), so long as they may return to the home, or a "community spouse" is living in the home (i.e. their spouse is not institutionalized and is still living in the home).

You should consult an attorney knowledgeable in the area of Medicaid and Estate Planning in your state to review options for techniques which may help you qualify for Medicaid and avoid the state seizing all your assets in the event you need long term nursing home care.

For Colorado Residents ONLY: John V. Stege, Attorney at Law. I practice in the area of Estate Planning including long-term care planning for seniors and special needs for the disabled.

2. Private Long-term care insurance.

The 2006 bill Bush signed was designed to force the middle class to buy long-term care insurance. Generally, this is a good idea if you can afford it. Not everybody can, and the costs are going up every year.




A Video Explains Some Basics About Long Term Care Insurance

Nationwide Costs of Long-Term Care Insurance

Here are the nationwide average costs for long-term care insurance for 2009:

Average price for a comprehensive long term care insurance policy

"(100% home care benefit plus skilled care coverage), 90-Day Elimination Period with Compound Inflation Protection Option (benefit increases 5% compounded annually) .

Age 55 $100 Maximum Daily Benefit x 3 Year Benefit Period
Cost: $ 723-per-year Individual Qualifies for Preferred Health and Spousal Discounts
2008 Cost: $709-per-year ( 2% increase )

Age 55 $100 Maximum Daily Benefit x 3 Year Benefit Period
Cost: $1,060-per-year Individual is Single; Qualifies for Preferred Health Discount
2008 Cost: $1,095-per-year ( 3% decrease)

Age 55 $150 Maximum Daily Benefit x 3 Year Benefit Period
Cost: $1,084-per-year Individual Qualifies for Preferred Health and Spousal Discounts
2008 Cost: $1,064-per-year ( 2% increase)

Age 55 $150 Maximum Daily Benefit x 3 Year Benefit Period
Cost: $1,590-per-year Individual is Single; Qualifies for Preferred Health Discount
2008 Cost: $1,578-per-year ( Less than 1% increase)

Age 65 $100 Maximum Daily Benefit x 3 Year Benefit Period
Cost: $1,364-per-year Individual Qualifies for Spousal Discounts; Standard Health Rate

Age 65 $100 Maximum Daily Benefit x 3 Year Benefit Period
Cost: $2,028-per-year Individual is Single; Standard Health Rate

Age 65 $150 Maximum Daily Benefit x 3 Year Benefit Period
Cost: $2,047-per-year Individual Qualifies for Spousal Discounts; Standard Health Rate

Age 65 $150 Maximum Daily Benefit x 3 Year Benefit Period
Cost: $3,042-per-year Individual is Single; Standard Health Rate

Age 65 $240 Maximum Daily Benefit x 3 Year Benefit Period
Cost: $3,274-per-year Individual Qualifies for Spousal Discounts; Standard Health Rate

Age 65 $240 Maximum Daily Benefit x 3 Year Benefit Period
Cost: $4,867-per-year Individual is Single; Standard Health Rate

The American Association for Long-Term Care Insurance is the professional organization serving insurance and financial professionals nationwide."

You can immediately see some problems here. As noted above, the cost of nursing care nationwide for a semi-private room is around $75,000 and going up each year by around 3% or so. 75,000 divided by 365 days = around $205/ day. NOT $100.

Thus, a 55 year old person who has been paying $1,064 a year for insurance, which will pay $150 a day, who decides needs long-term care, will have to cough up $56 a day from their own pockets to cover the remaining costs!

That's an extra $20,000 a year.

While many policies have inflation escalators, these will normally keep pace with the increasing costs of long-term care and perhaps a little more depending on interest rate changes, so our hypothetical patient will be little better off in ten years time, unless his policy increases significantly outpace the rate of inflation.

If he buys the policy when he's 55, he will have paid $10,064 in premiums by the time he's 65.

Meanwhile he may find that his policy coverage is inadequate to meet his needs given the cost increases in the meantime.

Still, if you can afford it, long-term care insurance is an absolute necessity.

Remember that you may use insurance for in-home care, which may delay the need to go to an assisted living or nursing facility.

Since home care is often cheaper and is generally preferable for most persons, having some insurance is better than nothing. Long-term Care insurance will vary for each state and you should check your own state qualified insurance agents for insurance providers and rates.


Useful Video About Different Types of Long Term Care Policies

Colorado "Long Term Care Partnership" Provides Some Extra Benefits!

In Colorado:

Colorado residents have some advantages over some other states because Colorado has enacted a "Long Term Care partnership" which is allowed under federal Medicaid law.

"Colorado’s Long-term Care (LTC) Partnership is a public-private venture designed to encourage and reward Colorado’s residents for planning ahead for future long-term care needs. Partnerships are an alliance between the private insurance industry and the state government to help Colorado residents plan for future long-term needs without depleting all of their assets to pay for care.

"A LTC Partnership policy allows consumers to protect personal assets in the event they must apply for Medicaid assistance to pay LTC costs. Colorado is using the “dollar-for-dollar” model; that means that LTC Partnership policy holders who apply for Medicaid coverage are able to maintain their assets equal to the benefits paid under the LTC Partnership policy."

Thus, in Colorado at least, if you purchase a "partnership policy" from a certified Insurer, then if you later need to apply for Medicaid, you can keep assets equal to the amount of your insurance coverage.

Of course, this still amounts to buying your own assets twice (you get to keep assets you already paid for and own, up to the amount of your coverage -- but you forfeit the insurance).

The States are thinking that you will probably use some of the insurance money to buy in-home care, which will lower the burden on their state's Medicaid program -- and they're probably right. Most people WILL use their insurance money to buy in-home care first. But, this can vary anywhere from $20/hr. for a part-time assistant a few days a week, to 24/7 nursing care that is even more expensive than a nursing home or assisted care facility, depending on your situation.

A person who gets 24 hour nursing care at home will expend their insurance proceeds very quickly.

Still, it's still better to have some coverage than just allowing the state to seize all your assets or tell you you are ineligible for Medicaid long term care, unless you spend all all your assets down to $2,000 or $3,000, plus grabbing your house after you die, so I guess we should be grateful for small favors!

There are similar programs under different names in a number of states. You should check your own state Insurance board or your qualified insurance agent for details, since this added protection is certainly a plus!

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Comments 3 comments

jessmartinez profile image

jessmartinez 5 years ago

We cant do something as to the high prices of long term care. But we can prepare financially and emotionally to offset the threats of LTC


iWilliams311 profile image

iWilliams311 2 years ago from Denver, Colorado

There's really no stopping price increases for long-term care services and I guess the best thing people can do is to plan early and look for options that could help them deal with the cost. The good thing though is that there are many financial products out there that can do this particularly long-term care hybrid policies and partnership plans. It's up to us to make that first step and start our research into these products.


TIMETRAVELER2 profile image

TIMETRAVELER2 2 years ago

We are just starting to look into LTC, Medicaid, etc and are finding that Attorney fees are outrageous, as are long term care costs. Nobody can afford such prices except the extremely wealthy. I would like to know exactly why these costs have gone so high. It also bothers me that because a person gets sick and needs LTC, he can lose everything. Horrible, Horrible, Horrible.

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