The Need for Long-Term Care Planning
One of the biggest unknowns in estate planning and planning one’s life in general is whether you will need long-term care and, if so, how much and for how long. While anyone may die in his sleep or from a sudden illness or accident, there is a strong possibility that all of us will need care from others at the end of life. The assistance may involve nothing more than shopping and house work, around the clock monitoring for dementia, or heavy-duty nursing care if we have a myriad of illnesses. It may last for a few weeks or several years. The older we get, meaning we haven’t been felled by a shorter-term illness or event, the more likely we will need long-term care.
Most long-term care is still provided by family members. My office manager’s mother had congestive heart disease which left her pretty much confined to her bedroom. She lived with my office manager and her husband who provided the bulk of her care. But as time went on, more and more care was provided by non-family members who were paid for their services. This is not unusual. Often, seniors experience a continuum of increased care over time, whether in the home, at an assisted living facility or in a nursing home. Some states also have smaller board and care homes.
The trend in recent years is for care to move out of nursing homes and into assisted living facilities or be provided at home. This lowers costs and permits people to live in a less institutional environment. One result, however, is that those people who are in nursing homes today are likely to be sicker than those residing in such settings in the past and likely to need a higher level of care. Another factor in this changing marketplace is that long-term care costs, like other health care costs, have increased dramatically over the last two or three decades, far exceeding the inflation rate.
Costs for care can vary widely, from a few hundred dollars a week to pay for coverage when family members are at work to $300,000 or more a year for around-the-clock care or care in the most expensive nursing homes, perhaps with private aides hired on the side. Two clients I met with recently reflect two examples of care and costs. The first is an attorney in his 50s whose wife suffers from the after-effects of cancer treatment she had when she was young and cannot be left alone for more than an hour or two at a time. He spends $75,000 a year on care for her while he is at work as well as during the day on weekends so that he can get some respite and spend time with their children who are young adults. He’s on duty the rest of the time. Fortunately, he earns a good income and the payments for his wife’s care are tax deductible, but he’s not putting anything aside in savings. His wife’s situation and care needs could go on indefinitely. They recently moved to a new house on one level, which was also an expensive transition.
The other client’s husband was a prominent research scientist who worked well into his 70s, but now suffers from Parkinson’s disease and Lewy bodies dementia. He recently moved to a posh nursing home at a cost of $23,000 a month or $276,000 a year. He has long-term care insurance, but it only pays $5,000 a month and the insurance company had been putting up roadblocks to paying the claim. (We resolved this for them.) Even with the insurance, the out-of-pocket cost is $216,000 a year. The couple has ample assets and can pay this for a while, but if the husband needs care long-term, the cost could seriously deplete their savings and undermine the financial security of the wife who is substantially younger than her husband.
Both of these clients are affluent, which makes these high costs of care manageable even if difficult. Most Americans, however, don’t have their resources and can be easily bankrupted by long-term care costs. Given that these costs are totally unpredictable, it’s very difficult to plan ahead – but not impossible. An understanding of the sources of payment for long-term care and planning options can help.
Long-term care costs, whether at home, in assisted living or in a nursing home, are paid for primarily from four sources: out-of-pocket, Medicaid, veterans benefits and long-term care insurance. Medicare, the health insurance for people over age 65, does not pay for long-term care. It was designed on a medical model. So it will pay for up to 100 days of skilled nursing facility care following a hospitalization, but only for so long as the patient is deemed to need skilled care. It will also pay for skilled care at home, in theory indefinitely, but this can take some advocacy. We’ll talk briefly about each source of payment in the following blog posts.