According to the U.S. Department of Health and Human Services, someone turning age 65 today will have a 70 percent chance of requiring some long-term care (LTC) service and support during the remainder of their life. For women, the typical LTC need will last about 3.7 years compared to men who will need about 2.2 years of care. Genworth’s studies show the median monthly assisted living cost last year in the SF Bay Area at $5,500 and the median monthly nursing home care cost in the range of $9,000 to $12,000 depending on the type of room. Let’s do the math – that’s an astounding $244,000 for a woman needing an average of 3.7 years of assisted living and $533,000 for the same amount of time in a private room at a nursing home.
The statistics are clear. Older Americans should be thinking about how they will pay for long-term care costs to protect their future. According to AARP, only about 7.2 million Americans who are 65 years or older currently own a traditional long-term care policy. The traditional long-term care insurance market has changed dramatically over the years making it very costly and less likely to be available on the market. A recent article in Reuters showcases the LTC insurance industry struggles. LTC insurance is generally considered very expensive and finding the right plan in the myriad of insurance products now available can be confusing. According to A Place for Mom, there are several myths and misconceptions about long-term care that anyone age 50 or more should understand, and I am passing them along below as I see these confusions come up regularly in my law practice.
#1 – One myth is that a person has to get rid of all of their assets to receive Medi-Cal benefits, which can help pay for long-term care (e.g., nursing home care). The general rule is that a person is not allowed to keep more than $2,000 in countable assets to be eligible for Medi-Cal. But there are exceptions. For example, in California your home can be excluded, if you subjectively intend to return home (even if it’s not objectively possible) or if a spouse, minor or disabled child still lives there. Also, personal property, one vehicle, and prepaid funerals generally qualify as exemptions. The Community Spouse Resource Allowance rules permit a well-spouse to keep a portion of the couple’s countable assets to prevent them from becoming destitute. Before making any attempt to spend down or transfer assets to qualify for Medi-Cal, speak to an elder law attorney as the rules, exceptions and planning methods to qualify are very complicated. Further, there are Medi-Cal recovery rules in California. Therefore, even if something is not “countable” for qualifying, it may become subject to recovery after you die. This comes as a surprise to many and can be frightening when it involves the family home.
#2 – Medicare will not pay for long-term care expenses except in the most specific and narrow of circumstances. This is a common misunderstanding as many believe that Medicare will cover all their long-term care costs.
#3 – Another misconception is that you are too young to think about long-term care insurance, let alone the need to pay for it. The truth is that even under the age of 65 a chronic illness could require long-term in-home or residential care services.
#4 – Many live under the assumption that their family will take care of them in their old age. While many older Americans are successfully aging in place, in part due to the benefits of technology, unpaid family member caregivers are typically not willing and available for long-term, intensive caregiving. Though it is a possibility, a family discussion is needed if there is an expectation that a family member is willing and able to take on a long-term caregiver role. While many family members are eager to provide oversight through the use of technology, the intensive requirements of long-term care are usually more than they are willing or able to accept. This is especially true when those family members are still raising or supporting their own children.
#5 – Most health insurance policies will not cover long-term care expenses or only to a very limited extent. I often hear the words – “I am not too worried. I have great health insurance.” Some plans will have minimal home care and skilled nursing benefits, however the plan only covers very short-term situations and is intended to produce recovery and rehabilitation while long-term care is generally custodial in nature for the safety, maintenance and well-being of a person with a chronic condition. Even some long-term care insurance policies will not cover ALL long-term-care expenses! Policies vary and you need to understand what yours actually covers, if you have one.
#6 – Many aging Americans believe that their retirement savings will cover the costs of their long-term care. The website “A Place for Mom” has a financial calculator to help individuals understand their specific needs to cover long-term care costs. Unless a person is independently wealthy, retirement savings can be spent down very quickly in those situations where the long-term care needs are high.
Chances are you (or your spouse or parent) will need long-term care during life. Being educated about what is best suited to meet your personal financial and health background needs is a significant first step. Understanding what legal and other options are available to help you in the event you need significant long-term care and may run out of money trying to pay for it is equally as important. Contact my office to schedule an appointment to discuss how I can help you with your long-term care planning.
