No one told us how expensive long-term care is! Growing older or caring for an aging loved one requires so much out-of-pocket spending. This is a major surprise to most families, which contributes to some pretty strong feelings of overwhelm and stress. Here I share some of the realities surrounding the costs of long-term care.
Why is long-term care so expensive?
There is a perfect storm brewing in the U.S. driving the rapid growth of families taking on the burden of both long-term care and paying for it.
Today, most long-term care for our aging loved ones is happening in our homes. There has long been a push in healthcare to shorten inpatient and institutionalized care in exchange for home and community-based care. What does this mean for families? Healthcare is doing everything it can to ensure that the majority of care is happening in your or your loved one's home.
Our largest generation, The Baby Boomers, are now senior citizens. What does this mean for families? More seniors equals more care needs. The ratio of aging loved ones that need help with care to the family members/friends that can help them is dropping rapidly.
Another special case for The Baby Boomers, they are the first generation to go through modern healthcare their entire lives! Our aging loved ones today are experiencing a longer late chapter of life than any generation before them. Individuals 65+ years old today are living on average 18 years longer than their counterparts in the previous generation. In one generation two decades of life were gained! What does this mean for families? Aging and caring for an aging loved one are LONG journeys.
The type of care today's aging individuals require looks different. They are not experiencing acute conditions. Instead, most individuals 65+ years old are living with chronic conditions, or health issues that require long treatment plans to manage. Today's chronic conditions were death sentences only a few decades ago. Diagnoses like diabetes, heart issues, lung disease, kidney disease, even cancer are now classified as chronic conditions and an individual can live many years with the condition well-managed. What does this mean for families? These types of conditions require care that looks like this. Help with mobility, healthy eating, errands, bathing, dressing, medication management, etc. This is long-term care. And, this is largely UNCOVERED financially.
The result: Families are responsible for care that once was taking place in clinical settings, by professional caregivers, and now for longer periods of time and for many more aging people. Throw in the severely underfunded and fragmented long-term care support services in our country and wham! Aging and caring for an aging loved one are overwhelming, long-lived, and expensive undertakings.
Let me break down long-term care and its costs.
Type of care | What it is | Costs / Coverage options |
Home Care | Personal Care | Homemaker services | Help when you need an extra hand. Home care staff typically includes certified nursing assistants to support individuals staying at home. Usually available 24-hours a day and 7-day a week, including holidays Will create tailored care plans for occasional or ongoing assistance. Services can be scheduled in increments (i.e. 2-hour block up to 24 hours) Types of care tasks provided: Laundry Dog walking Companionship Taking out garbage Making bed Changing linens Organizing/cleaning closets Meal preparation Transportation for errands, shopping, doctor appointments Bathing Dressing Hygiene | National average hourly rate is $26/hour Covered by Long-term Care Insurance policy: SOMETIMES Covered by Medicare: NO (unless you are also getting skilled nursing care) Covered by Medicaid: YES Covered by VA benefits: SOMETIMES |
Adult Day Care | Daytime care for loved ones that can not stay home alone safely. Usually available for a 12-hour window during the day (i.e. 7AM to 7PM). Have professional staff to assist with various health needs during the day. Enrichment activities are offered including music, group outings, art, exercise, games, etc. Provide meals and snacks during the day. Individualized care plans. Most have support groups for family caregivers. Types of care tasks provided: Medication management Memory stimulation Meals Health assessments Health monitoring Dementia care Post-hospitalization recovery care Physical, occupational, and speech therapy | National average: $78 per day Covered by Long-term Care Insurance policy: SOMETIMES Covered by Medicare: NO Covered by Medicaid: YES Covered by VA benefits: YES |
Home Health | Comprehensive care for individuals with the aim to get better from their illnesses. Available 24-hours a day and 7-days a week. Professional nursing and therapy services. Individualized care plans. Many provide family caregiver and patient education. Types of care tasks provided: Medication management Pain management Care coordination Wound care Nutrition management Injections | National average: $27 per hour Covered by Long-term care Insurance policy: USUALLY Covered by Medicare: Only covers physical, occupational, and speech therapies at home (if approved). Covered by Medicaid: YES Covered by VA benefits: YES |
Hospice | Comprehensive care for individuals facing life-limiting illnesses. Available 24-hours a day and 7-days a week. Care is overseen by a physician and comes with a healthcare team including nurses, social worker, dietitian, physical therapists, occupational therapists, respiratory therapists, speech therapists, pharmacists, etc. Many offer additional therapies such as music, art, pet, and bereavement. Types of care tasks provided: Medication management and monitoring Patient and caregiver education Pain management Skilled nursing Tube feedings and enterals IV medication administration Comfort care | National average: $160-$200 per day for Level 1 in-home care 2-3 days a week. Covered by Long-term Care Insurance policy: SOMETIMES Covered by Medicare: YES Covered by Medicaid: YES, if the physician deems “terminally ill”. Covered by VA benefits: YES |
Palliative Care | Specialized medical care for serious illnesses. The focus is on relief of symptoms and quality of life. Not necessarily just for dying patients. Can be provided along-side curative care. Care is provided 24/7 by specially trained doctors, nurses, and other specialists. Types of care tasks provided: Pain management Management of depression and anxiety Management of nausea Emotional support Spiritual support | Covered by Long-term Care Insurance policy: YES Covered by Medicare: YES, typically for 100 days. Covered by Medicaid: YES Covered by VA benefits: YES |
Resource for you: Use the Genworth tool to find the costs of care in YOUR part of the country.
Case Study
Beth is 82 years old. She lives alone. Her daughter lives nearby. Home tasks like laundry, cooking, and cleaning have become hard for Beth to manage alone and she can’t drive safely since she broke her hip four months ago from a fall on the stairs.
Her hip surgery was covered financially by Medicare. She received 90 days of post-surgery rehab, also covered by Medicare.
But now, Beth is home. She is still healing. She needs to eat regular healthy meals to ensure she's rebuilding muscle and keeping her strength. She struggles with pain sometimes and often can’t remember which pill is for pain, and which ones are for other stuff. She has follow-up appointments that she struggles to attend because she can’t drive. Beth does not need skilled-nursing level care, she needs home care/personal care.
As you can see from the chart above, that type of care is NOT covered by her Medicare plan.
Beth, like many adults her age, does not have a long-term care insurance policy. She is not the widow of a veteran. She receives money each month from a pension plan and an annuity that she and her husband worked hard to establish, which means she earns too much to qualify for Medicaid.
What's the impact on this family? Beth’s daughter stops by three times a week to help as much as she can, but she works full-time and finds it overwhelming juggling her job and her mom’s care needs. She hired professional help to ensure her mom is safe in her home during the day and has everything to keep her healthy and healing well from surgery. The amount of hours the home care aide is with her mom is costing them $1,000 each week.
This is the reality most families live in. This black hole where the level of care isn’t a covered care cost under Medicare and the income is too much for governmental support to kick in. For the family it means their loved one could miss out on all the care they need, because paying for it out-of-pocket stretches them too thin financially.
Three financial tips that this family could use.
Looking at Medicaid
The chart above make pretty clear that having Medicaid makes paying for long-term care a whole lot easier. Medicaid is society’s safety net for providing long-term care service when we’ve outlived our financial resources. And, most people today ARE outliving their financial resources!
When care costs are piling up, most families start thinking about Medicaid eligibility. Here are some reasons why eligibility for this benefit is tricky.
The application is complicated.
The qualifications are scary.
There are penalties.
Let’s Dive Into This:
It is entirely possible to be flat broke, needing care, and still ineligible for Medicaid according to their rules. Medicaid will look at your checking and savings accounts, retirement accounts, annuities, and cash-value life insurance plans, just to name some, and consider them all assets. The total assets cannot exceed their criteria, which is around $4,000 for a married couple, and a bit over $2,000 for a single person. For couples and individuals that have worked hard to save, have pride in their assets, and perhaps want to leave a legacy, this makes eligibility a scary process. There are tactics, however, for families to become eligible and protect assets.
Additionally, there is a 5-year lookback period for Medicaid applicants related to any prior gifts made by the applicant. These will be penalized or could result in Medicaid denial. One guarantee for everyone applying for Medicaid is the surfacing of any mistakes. They will reveal themselves. Again, scary.
Our tip: Becoming eligible for Medicaid is separate from using it. The best plan is planning! Better to learn about potential penalties early. Better to learn about strategies to protect key assets. Better to pinpoint the exact month that cash will hit the limit so pulling the trigger on using Medicaid is well-timed. It’s best to assume Medicaid could be a realistic need in the future and plan for eligibility early. Most families wait until the need has already arrived and realize significant consequences for having waited that long. Your best planning partner here is an attorney specializing in Medicaid eligibility. It is common for your first consultation to be free, so tap into that resource soon.
Looking at Taxes
Here are some realities around taxes and aging / caring for an aging loved. Some of these strategies can add money to your situation!
Long-term care insurance premiums could be deductible.
You can claim up to $500 in credit for elderly parents.
Care costs are normally deductible.
You may use Flexible spending accounts (FSAs) and health savings accounts (HSAs) to pay your elderly dependent's care costs.
For the 2021 tax year, you can claim a portion of up to $4,000 in caregiving costs for one person and up to $8,000 for two or more.
Let’s Dive Into This
The 2017 federal tax law expanded the Child Tax Credit (CTC) to allow taxpayers to claim up to $500 as a nonrefundable “Credit for Other Dependents,” including elderly parents. There are some criteria that have to be met. Additionally, you can deduct care costs if they exceed 7.5% of your Adjusted Gross Income. You CAN use FSAs and HSAs to pay care costs, which gives you tax-free dollars to spend on things like medical bills, copays, insurance deductibles, over-the-counter medical supplies, personal protective equipment, and even treatments not covered by insurance. Just remember, if you use this strategy you won’t be able to claim tax deductions for those costs. The 2021 tax credit requires that your loved one qualifies as your dependent. Check out the AARP article about taxes HERE to dive deeper into criteria for tax benefits above
Our Tip: Tax law is constantly changing, so obtaining professional tax advice is essential, preferably from a CPA. Look for one who works regularly with caregiving tax issues. They exist! You’ll find these professional fees will pay for themselves twice; often in measurable tax benefits.
Looking at a Reverse Mortgage
Usually just the mention of the term “reverse mortgage” makes people shy away. There are a lot of misconceptions about this tactic, which is a shame because it’s a pretty incredible way to access income that can help pay for long-term care costs. Here’s a few facts about the reverse mortgage.
It’s just a mortgage.
You still own the home.
The line of credit grows over time.
The reverse mortgage doesn’t impact Medicaid eligibility.
I'm so interested in reverse mortgages, that I talked with Housing Wealth expert, Don Graves. Check out this video where Don and I chat about reverse mortgages and debunk misconceptions and share how it works.
Our Tip: For many families a home is their major asset and should be considered earliest when cash is needed for care costs. The residence is not counted as an asset by Medicaid while owned by the applicant as a residence, making this a fantastic strategy as long as the senior remains in the home. If there is any chance they may move out of the home, take serious precaution so no harm is done for any future Medicaid eligibility.
While finances can be a shock when aging and caring for an aging loved one, there is empowerment in knowing some solutions. There are more solutions than most families will ever realize, especially if they are navigating the financial turmoil of long-term care alone. Utilize our Elder Care Cost Analysis now to get on an empowered and financially positive path today.
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