Long Term Care Guide

The American population is aging at a dramatic rate, and this trend is likely to continue for the foreseeable future, given demographic trends. The aging process is unique and looks different for everyone. However, as people age, many experience physical and cognitive decline. Sometimes, these declines are precipitous enough that the person may need additional care and assistance. In some cases, this may include long-term care. Below, we explore the ins and outs of long-term care. 

What is Long-term Care? 

As the name suggests, long-term care is care that lasts over an extended period of time. This contrasts with short-term care and assistance that some people may require following a surgery or an accident. Long-term care is often set up because a person has a chronic or degenerative condition that will not get better over time. In the beginning, long-term care may provide only minimal assistance. However, over time, long-term care may begin to offer more services. 

More Than Medical Care

Often, people assume that long-term care is primarily medical care. But, this is frequently not the case. Instead, long-term care providers are generally helping their clients with daily tasks and chores. Some of these tasks may relate to hygiene, such as assisting with bathing and toileting. It is also common for the long-term care provider to help with dressing and make sure that the client is well-fed and hydrated. As an umbrella term, these tasks are frequently referred to as activities of daily living, or more commonly – ADLs. 

Other Helpful Tasks

But, long-term care providers frequently go above and beyond that. They may be tasked with money management, including making sure that the person’s bills are paid in a timely manner. The long-term care provider may also take care of a client’s beloved pets. Another vital role may be assisting with communication, allowing the client to remain in touch with family members who may be geographically remote. All of these tasks require a strong degree of comfort and trust between the provider and the client. 

Medical Care Varies for Everyone

Even though long-term care tends to primarily be non-medical in nature, this does not mean that the provider is not offering some medical care. The amount of medical care and the type of services provided will depend on the client’s needs. Some clients simply have more intensive medical needs than others. Examples of medical care provided may include: sorting pills and making sure that they are taken as dosed, and changing dressings on wounds.  

Over 50% of Americans Will Need Long-term Care

Many people think that long-term care needs, such as the types described above, are things that only happen to someone else. But, recent research from the U.S. Department of Health and Human Services suggests otherwise. This research shows that more than 50 percent of older Americans will require long-term care. And, perhaps even more shockingly, the price of this long-term care may approach $150,000.

Who Needs Care? 

As the eye-opening statistic above noted, the answer is potentially everyone. Anyone runs the risk of being impacted by an injury or illness that would require them to receive long-term care and assistance. Even being under the age of 65 does not perfectly protect a person. For example, a younger person could be severely injured in a car accident, leading to the need for long-term care. 

Even though no one is immune from the possibility of needing long-term care, certain factors could skyrocket the likelihood that you, or a loved one, will need long-term care. 

Risk Factor #1: Poor Health

One risk factor is not surprising, and that is being in generally poor overall health. People with chronic health conditions, such as Type 2 diabetes and heart failure, are more likely to need long-term care. These individuals may also be more likely to need more intensive assistance, focused more on medical care than on simply ADL tasks. It is worth noting that approximately  1 in 5  adults over the age of 65 in the United States has been diagnosed with Type 2 diabetes. And, it is not just having a medically diagnosed condition that can increase your risks. Your risk could go up if you so ply lead a sedentary life. 

Risk Factor #2: Age

Age also plays a significant role in a person’s need for long-term care. For example, the oldest of the old (those above the age of 90) are more likely to need long-term care than their 65-year old counterparts. 

Risk Factor #3: Gender

Perhaps not surprisingly, gender also plays a role in the need for long-term care. But, surprisingly, it is women who are more likely to need long-term care. Women are healthier than men, but they also live significantly longer on average. This longer lifespan may translate into a greater need for long-term care. 

Other Risk Factors

These are not the only factors that could increase the likelihood that you may need long-term care. The risk may also skyrocket if you are single, living alone, or do not have a family member who can step in and fill this role. 

How Much Care Will You Need? 

Unfortunately, there is no one simple answer to this question. Different people may have dramatically different needs, and it may be impossible to predict these needs ahead of time. 

Consider The Length of Care

There are numerous parameters to think about in terms of care. First of all, you will want to think about how long you will need the care for. Will it be for a finite period of time, such as when you are undergoing cancer treatment? Or will it be permanent due to a degenerative condition, such as Parkinson’s? The answer to these questions will impact what sort of costs you are looking at – with lifelong care clearly being more expensive. 

Intensity of Care

In addition to the length of care, you will also want to think about the intensity of care and the level of intervention that you may need. For example, do you or your loved one only require assistance with bathing? Or do you have needs throughout the day? Perhaps not surprisingly, more intense needs usually correlate with higher costs. 

Keep This in Mind

It is also important to remember that we do not always have a crystal ball with the aging process. Our needs may change over time, which can influence the type of long-term care we are looking for.  But, irrespective of these changes, statistics do paint a clear and compelling picture. Roughly 50 percent of older Americans will need long-term care during their life. And of this number, approximately 1/3  will need care for more than two years, and many will need care for more than five years. 

Cost of Care

Many people have never really thought about the cost of long-term care. Therefore, not surprisingly, they are shocked when price tags are put in front of them. Some studies suggest that one year in a nursing home in Manhattan costs more than $150,000. Costs in other areas of the country may be lower. Unfortunately, the costs are still high enough to be out of the reach of many middle-class families. 

The Average Cost of Long-term Care

For most parts of the country, $80,000 – $90,000 per year seems to be an average cost for nursing homes, and assisted living facilities are not dramatically less expensive. Even though the sticker shock may not be as great for in-home care, this option is also not inexpensive. In many areas of the country, home health workers can cost $20 – $25 per hour. In addition, the price tag can go up rapidly if you or a loved one requires 24/7 care or intensive or specialized services. 

This means that many families attempt to cobble together family caregivers. As you might imagine, this can be stressful and overwhelming for family members trying to balance a wide range of commitments. If you are considering this option, it is crucial to have transparent conversations with all family members and make sure that everyone agrees. 

Even with the mind-boggling price tags, it is important to remember that there are options for financing this care. We explore some of them in greater detail below. 

Who Pays for Long-term Care? 

After people get over their initial sticker shock related to long-term care, their next question is often: Who pays for these services? Quite honestly, there are many answers to this question depending on an individual or family’s circumstances. The answer may also evolve over time as a person’s need for care changes. 

Out-of-Pocket

The first answer is that some families pay out-of-pocket for the long-term care that they need. But, this can be impossible or, at the very least, financially onerous for many families. To make this feasible, some families need to cash in their investments, such as 401ks. 

Another option that is commonly pursued is something that is called a reverse mortgage. Reverse mortgages are a type of mortgage in which an older person can use their home value as a line of credit. They do not have to repay this money while they are alive. But, upon their death, their family needs to pay back the money when the property sells. Reverse mortgages can be a great option for many older Americans. However, make sure to talk with a trusted financial professional before deciding if this tool would be good for you. 

Life Insurance and Other Options

Life insurance policies and annuities are other popular financing options for older Americans looking to finance their long-term care. Again, however, there may be concerns with choosing this financing approach, so make sure to consult with a professional. 

Other common financing options include long-term care insurance and the government, via either Medicare or Medicaid. We discuss these options in greater detail below. 

What is Long-term Care Insurance? 

Long-term care insurance is a particular type of health insurance designed to cover its policyholders’ long-term care needs. Long-term care insurance generally does not differentiate between the kind of care that it will cover. The benefits can be used to pay home health workers’ salaries or be used for the bills at nursing homes. However, different policies are set up in different ways about what they will or will not help with. Therefore, it is important to carefully assess your preferences with the aging process when you set up your policy. It is also critical to regularly review your policy to ensure that it is still working for you and your evolving needs. 

What You Should Know About Long-term Care Insurance

Long-term care insurance is an integral part of many families’ financial planning process. But, long-term care insurance is not a panacea. There are several things to be aware of. First, some policies only cover long-term care for a finite amount of time, such as two to five years. In these cases, a person may out-survive their policy. This means that they may be left scrambling to pay for their coverage. 

A second caveat is that most policies put a maximum on their daily reimbursement levels. Some facilities or options may be more expensive than the maximum. In this case, families will be faced with out-of-pocket costs. 

A final concern may be in terms of premiums. Generally, long-term care insurance costs are lower when you buy it when you are younger or in relatively better health. The insurance company may raise insurance premiums over time, which could potentially price some people out of the insurance market. 

Private Health Insurance

In addition to long-term care insurance, some private health insurance companies may also cover portions of long-term care costs. However, this coverage tends to be limited. It tends to only cover care for a limited period of time after a surgery or hospitalization when a person may need intensive skilled nursing or rehabilitation services. 

Medicare and Medicaid 

The final financing options for many individuals and families are Medicare and Medicaid. Although sometimes people tend to confuse or conflate these two programs, it is important to remember that they are very different. They have different qualification methods and may cover very different services and types of care. 

Understanding Medicare

First, it is important to jog our memories about who does or does not qualify for Medicare. In general, Medicare covers everyone over the age of 65. It may also cover some individuals under the age of 65, including those who qualify for Social Security disability benefits and those who are on dialysis. 

Another category of individuals who are covered under Medicare is people with Lou Gehrig’s Disease. We are often conditioned to believe that Medicare covers all of a person’s health care costs. And, yes, Medicare is generous. However, some health care costs still fall to the individual, and Medicare, in general, does not cover long-term care services. 

Does Medicare Cover Long-term Care?

In general, Medicare does not cover long-term care. There are some exceptions, however, when Medicare might provide some cover. One exception is for older Americans who have recently been discharged from a hospital stay of at least three days. If skilled medical therapy is required on a daily basis, Medicare will pay for medically necessary stays if you are discharged to a skilled nursing facility. For the first twenty days, Medicare will cover the entirety of the stay. If the stay stretches from 21 – 100  days, costs will be shared between Medicare and the patient. After the 100 day mark, the patient will be personally responsible for all of the care. The main caveat is that you must require skilled medical care on a daily basis, e.g. wound care, intubation or rehabilitation. If you only need help with activities like bathing, toileting, or eating (often known as ADLs or custodial care) you will not qualify for Medicare coverage.

There are some other exceptions for Medicare as well. For example, a patient may have skilled nursing care, or other therapeutic services, covered if it is necessary to treat their illness/disease or if the absence of this care would lead to a decline in the patient’s health or well-being. Getting this care covered, however, requires your doctor to be fully on board. The doctor will need to provide documentation illustrating his/her rationale to Medicare. Even with this documentation, there is anecdotal evidence that some families still run into roadblocks and red tape with Medicare. 

Medicare also provides generous coverage of care that falls under the hospice umbrella. This care can be accessed in your own home or in a facility, such as a nursing home or hospice center. The only caveat with this coverage is that doctors have to assess that the patient likely has less than six months to live and that the patient is no longer engaging in life-saving treatments. 

Medicare and Medicaid are Different

As noted above, Medicare is an age-qualified program, with some exceptions allowed for people with chronic medical conditions. Medicaid, on the other hand, is an income- and asset-qualified program. Medicaid provides medical services, including long-term care, to people who would otherwise not be able to afford it. Care may be covered in a nursing home or provided in the person’s home. 

Qualifying for Medicaid for long-term care is a two-stage process. In the first stage, the individual needs to show that they are income- and asset-qualified. This means that they need to make or have fewer resources than the level that the state in which they live has set. Once their eligibility on these criteria has been established, the state will then assess if they qualify for long-term care. 

Medicaid Eligibility

As noted above, not everybody will qualify for Medicaid. Medicaid is designed to help people who would not otherwise be able to afford medical services, including long-term care. Therefore, the government has set up guidelines for income and assets to determine who does or does not qualify. Although these are often referred to as government guidelines, it is important to remember that there is not one single guideline in the United States. Instead, each state is allowed to set up income and asset thresholds to determine eligibility. 

Other Eligibility Requirements

In addition to qualifying for Medicaid under these income eligibility requirements, which are generally extremely low, there are two other options that can qualify more people in need of long-term care assistance for help. 

Special Income Group

The first option is a special income group. The special income group sets a higher income threshold, often around $2000 per month, provided that the person is in a long-term care facility. The biggest caveat with this program is that not all states offer it as part of their Medicaid coverage. Currently, only 40 states offer expanded special income groups. 

Medically Needy

The second option is similar, in many ways, to the expanded special income groups. It is referred to as medically needy. If someone is identified as being medically needy, they can use their medical expenses to offset their income. In this case, their initial income level may have been too high to qualify for Medicaid. However, when their medical expenses are subtracted out, they may be under the threshold of what qualifies them for Medicaid. The challenge with this program is that not all states have chosen to make it a part of their Medicaid programs. At present, there are only 33 states with medically needy exceptions to qualifying standards. 

Long-term Care Uncovered 

As the United States population continues to age, more and more people will be looking for long-term care. This long-term care can cover a wide range of services, from help with bathing and dressing in a person’s own home to medically intensive care in a nursing home facility. 

Statistics indicate that most people will need care for at least part of the time that they are older, and these costs can be significant. They often exceed the amount of money that families have. The good news is that there are many options to finance this important care, including long-term care insurance and Medicare and Medicaid. Each of these options was discussed in greater detail above.