A friend of mine recently shared this story with me; Her father had been quite sick for some time. He was 73 years old, and in and out of the hospital. He was going to need long-term care in the form of hospice care but preferred to receive care in the comfort of his home. She and her sister were balancing long work days with shuttling to and from the hospital for visits. They were relying on their father’s retirement fund and Medicare, and then Medicaid to pay for care.
He stabilized enough to move into hospice care. The sisters decided to give up their apartments and move into his house so that they could be there to care for him when he got out of hospice care. It was a hard decision to make. But they had no alternative.
Unfortunately, their father passed away in hospice before he was allowed to return home. The sisters discovered that due to the terms of Medicaid, if their father had required further care and lived another eight days, then a lien would have been placed on the house, and they could have lost everything.
I recently wrote about key considerations when you think long-term care is on the horizon for yourself or for loved ones. But that story brought home the vital importance of knowing what kinds of care are out there, and making a plan to pay for it. The consequences of not knowing are too great.
Here’s a rundown of the four major ways to pay for long-term care including Medicare, Medicaid, out-of-pocket or private long-term care insurance. Each form of payment comes with different implications.
Medicare is a federal program that requires co-payment and provides hospital and medical insurance to people 65 years or older and to qualified ill or disabled persons. I would not recommend relying on Medicare because it requires the individual to meet certain stringent requirements (Medicare pays 100% for the first 20 days only after a three-day hospital stay). Medicaid is reserved for low-income individuals. However, there are different financial strategies that can help you or a loved one qualify for Medicaid, such as spending down assets or spousal asset transfers. Self-insuring necessitates a thorough understanding of the cost of care you can expect in your area, and long-term care insurance (LTCI) policies are varied based on location, facility chosen and other factors.
While long-term care is a personal decision, it helps to discuss long-term care insurance with a qualified agent so that you are aware of plans and policies. A good agent will be able to tailor a plan to fit your needs (and not the other way around). They will ensure you understand the limitations of the policy you are considering. Depending on the type of policy you choose, you could be excluded from certain things that may not be covered, including extra expenses such as supplies, medications and linens. These expenses can add up.
The earlier you look into a plan, the lower the cost will be. It’s also important to know that care can be denied on the basis of some common pre-existing medical conditions, including stroke, Alzheimer’s Disease, Multiple Sclerosis or Parkinson’s Disease.
Aside from health and age, external factors can lower the cost of LTCI. If your employer offers a group long-term care plan, then the costs may be greatly less than an individual plan. Also, see if your state offers a Partnership Program, a collaborative effort between the state and private insurance companies selling policies in that state and to state residents. For some valuable insights about paying for long term care by both location and facility, check out Genworth’s Cost of Care Map. There are so many things that are out of our control in a lifetime, but quality of life should not be one of them.