What You need to know about Long-Term Care

Long-Term Care

Written by Vid Ponnapalli, MS, CFP®, EA

Vid Ponnapalli is a Fee-Only financial advisor providing Customized Financial Planning, Investment Management, and Tax Services for Busy Professionals in New Jersey, New York City, and across the country.

April 28, 2018

When it comes to long-term care planning, I often heard – “long-term care may not be necessary and I will cross the bridge when I get to it”. This, in fact, is a dangerous myth as I mentioned in one of my previous posts. So, here you go – All You need to know about this important topic. Let us discuss.

As you enter your “golden years,” perhaps you imagine yourself traveling, visiting grandchildren, or pursuing a favorite hobby. Unfortunately, none of us can predict what the future may bring. But, according to the U.S. Department of Health and Human Services, more than 70% of individuals over the age of 65 will ultimately require some form of long-term care (a.k.a. LTC).

LTC refers to a wide range of medical, rehabilitation, personal care, and social services, whether in a nursing home, assisted living facility, or at home, for those who need assistance due to an illness or disability. If you should need LTC at some point, your world could change significantly, affecting not only your quality of life but your finances, as well.

For example, cost of a semi-private nursing home room in my home state, New Jersey is about $120,450 a year, according to Genworth, which may be higher or lower in other parts of the country. And, these costs are continuing to rise.


Who Pays?


Many people believe that Medicare covers the cost of LTC. However, Medicare does not cover custodial or personal care, and coverage for skilled nursing home care is limited. By default, Medicaid funds LTC, but generally requires recipients to substantially reduce their assets by “spending down” before becoming eligible for assistance.

Unless you plan ahead, the high cost of LTC could deplete a lifetime of hard-earned savings. For couples, this is especially challenging because one spouse may live for many years after his or her partner requires LTC. Whether you are single or married, LTC planning now may give you the opportunity to make appropriate choices for you and your family. Here are some important considerations about your future payment of LTC:


Medicare does not cover LTC


Medicare covers some nursing home costs, but only for skilled care, which is medically necessary for a limited period after a patient is released from a three-day stay in the hospital. Depending on the medical necessity, Medicare may also pay for skilled care at home for a limited period.


Medicaid covers LTC with strict eligibility requirements


Medicaid is the primary payer of LTC services in the U.S. Medicaid also covers a limited amount of services offered at home, and in the community, for those who might otherwise require nursing home care. Without advance planning, you may be required to substantially reduce or nearly exhaust your financial resources before meeting Medicaid’s strict financial qualifications.


Those ineligible for Medicaid generally have two options 


Option 1 is planning to self-fund long-term care expenses and save additional money in your nest egg. While it is definitely worthwhile considering this option, you need to be aware of the rising costs of extended care, and how an LTC event could deplete your savings quickly, leaving few or no assets for your spouse and future generations.

Option 2 is purchasing a long-term care insurance policy. The challenge here is choosing the policy that fits your unique needs. Several questions to answer – What should be the elimination period? 90-day or 180-day? How much daily limit should I have on my policy? or should I be worried about inflation protection? And the like. It is not easy.


Covering All the Bases


By planning today, you may help ensure that you have the financial resources for quality LTC in the event you need it while easing the caregiving burden on your family and loved ones.


So, what do you think? Are you approaching Retirement and if so, do you have plans to cover long-term care? When you’re ready to embark on LTC planning, please don’t hesitate to give me a call. I will be eager to help. Best of luck!

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