Paying for Long-Term Care

As individuals age, they often begin to think about where they would like to live out their days. Most would like to stay in their homes for as long as possible. However, this often requires home health care and other medical services, which can quickly drain any savings or retirement funds.

According to the U.S. Department of Health and Human Services, a home health aide in New York and New Jersey costs between $45,760 and $57,200 annually. A private assisted living facility costs between $46,170 and $72,000 annually. A private room in a nursing home costs $102,049 and $255,891 annually.

There are a variety of means to pay for long-term care. This article will give a brief overview of the most common methods used to fund these care services.

Personal Funds

Many individuals initially use personal funds to pay for in-home medical care. This can include retirement savings accounts, like IRAs or 401(k) plans, or personal savings. However, even those who have saved diligently for retirement will find that their personal accounts can quickly be drained by long-term care costs.

Government Insurance Programs

Medicare is federal health insurance for individuals over the age of 65. Many are surprised to learn that Medicare does not cover most long-term health care costs. Rather, it focuses on “medically necessary care” like medication, doctor visits, and hospital stays. Medicare can cover some short-term care costs if you meet certain requirements, but will only pay for a small portion of the overall cost. Medicare will also cover the cost of short-term care if your doctor deems that the care services are medically necessary. This can include intermittent nursing care, social services, physical therapy, and medical supplies.

Medicaid is another government health insurance program that can help with long-term care costs. Medicaid covers a broader scope of long-term care, but the program is only available to people with a limited income. If you qualify, Medicaid will cover long-term nursing facilities and home health care costs. Individuals who do not qualify for Medicaid will often use their own personal funds to pay for care until their personal funds are drained and they qualify for Medicaid. This is called “spending down”.

Veteran’s Benefits

Veterans may use their benefits to pay for personal care and home health services for themselves and their spouses. If a veteran is suffering from a service-related injury, the Department of Veteran’s Affairs (VA) will provide long-term care services. The VA will also provide long-term care services for eligible veterans who cannot afford to pay for the care they require. Additionally, the VA has several programs that help individuals stay in their homes by providing home health care and other services.

Long-Term Care Insurance

Long-term care insurance can help cover certain types of care services. The services that are covered depend on the terms of your policy. There are many policies and plans to choose from, including plans that include both home health services and nursing home care. It is a good idea to purchase your policy when you are younger and in better health, as premium prices increase as you age and experience health problems.

Reverse Mortgage

A reverse mortgage differs from a traditional mortgage in that you are not required to make any repayment on the mortgage until the borrower sells the home, no longer lives in the home, or dies. Individuals use reverse mortgages to obtain tax-free cash. You can live in your house until your health requires you to move into a nursing home or until you pass away. There are no income requirements to qualify for a reverse mortgage.

Life Insurance Accelerated Death Benefits

Some individuals pay for long-term care through accelerated death benefits provided by their life insurance policy. This allows policyholders to receive a cash advance on your life insurance policy while you are still living. However, this will deduct from the amount that your beneficiaries will eventually receive. If your policy does not allow accelerated death benefits, you may be able to sell your life insurance policy for its current value. This is typically only available to those over 70 and that money is taxable.

Trust

Finally, an individual can transfer his or her assets into a trust and appoint a trustee to manage and administer the trust. You can include terms in the trust that provide for your long-term health care needs. However, this is only a viable option for those who already have the necessary funds to pay for care services. It is merely a means to take control of your health care needs if you are not competent to make those financial or medical decisions.

DISCLAIMER: Attorney Advertising. The information provided in this post is for informational purposes only and should not be construed as a legal advice. It is not intended to create an attorney-client relationship with a reader and should not be relied upon without first seeking professional legal counsel.