Question: My wife and I both in our late 50s -- read your column every week and find it to be very informative and thought-provoking; however, we must have missed the basics about how we can begin to plan to pay for long-term care should we need it. Our parents had horrible experiences that resulted in their total financial impoverishment. If its not too much trouble, would you send us this information?
Answer: Since the average cost for a year in a nursing home averages between $36,000 and $65,000, long-term care can be financially devastating, especially if a person stays for three or more years. We have heard from some readers whose families have spent upwards of $250,000 for this type of care. When it comes down to payment sources, there are only four ways in which you can pay for nursing home long-term care: (1) Medicare which provides coverage for a limited period of time under very limited circumstances; (2) private pay which means you use you income and assets; (3) long-term care insurance; and (4) Medicaid which is available only under limited circumstances.
Medicare, the federal insurance program for the elderly and disabled, pays for skilled nursing home care only after a hospital stay of at least three days. In this event, Medicare will pay all of the cost of the first 20 days of skilled care after a hospital stay and, assuming you are certified to still need skilled care, Medicare will pay a portion of the cost of days 21 through 100. Most folks over the age of 65 have a Medicare Supplement policy that covers the co-payment. If not, the co-payment will be your responsibility. If Medicare stops paying, most supplements also stop.
If Medicare has been exhausted or if the nursing home stay does not qualify, the remaining payment options are long-term care insurance, private pay, and Medicaid.
Medicaid, a joint state and federal welfare program, is available only to people who qualify medically and who have low incomes and limited resources which are established on a state-to-state basis subject to federally determined maximums. Federal law restricts how people transfer assets in order to qualify for Medicaid by using a "look back" period of 36 months from the date the Medicaid application is filed. There is a 60 month look back if assets have been transferred into a trust.
If you are going to purchase long-term care insurance, you should probably do so in your late 50's or early 60's while your health is still good and the premiums are affordable. Premiums are based on your age and the type benefits you choose to purchase. Long-term care insurance must be purchased before you need long-term care and, since you will be medically underwritten, if you have certain illnesses, you may not be insurable.
If you choose to purchase long-term care insurance, you will make three decisions: (1) The amount you want to receive from the insurance company each day of your care called "The Daily Benefit" can vary from $50 to $250 per day. The higher the amount, the greater the premium. (2) The length o f time you want to receive payments from the insurance company once you need care called "The Benefit Period" can either be a specific number of years or for your life. The longer the time period, the greater the premium. (3) The number of days for which you will be responsible for paying for your care after you enter a nursing home called The Elimination Period" is much like a deductible and can be from "0" days to 100 days. The shorter the elimination period, the greater the premium.
You will also be given the opportunity to add optional benefits to your policy for additional premium: (1) In order to try to keep up with inflation, you can purchase a five percent simple interest or five percent compounded interest factor which increases your Daily Benefit each year. This is called the "Inflation Factor". (2) Because you may not need skilled or intermediate nursing home care, you may want to choose the "Home Health Care Coverage" option which gives you a more choices of where you receive your care. For example, by purchasing this option, you may receive payments while you are cared for in your own home, in Adult Day Care Centers, or in Assisted Living Facilities.
Jan Collins is an editor and award-winning writer. Jan Warner is a matrimonial, tax, and elder law attorney.
Please email your questions to janwarner@nextsteps.net or mail to P. O. Box 11704, Columbia, South Carolina 29211.
