Evaluating Your Long Term Care Options 

It's difficult to predict if or how much care you will need, whether you will have family or friends who can provide some or all of your care, and how much care may cost you. However, it's reasonably easy to predict that if you need extensive long-term care services or need services over a long period of time, you will have to pay for some or all of it out of your personal finances. That's why an increasing number of people are using private financing options to help them pay for long-term care if and when they need it.

Private long-term care financing options include long-term care insurance, trusts, annuities, and reverse mortgages. Which option is best for you depends on many factors including your age, your health status, your risk of needing long-term care, and your personal financial situation. The following charts summarize how age and health status may affect your eligibility for and choice of private financing options.

What Does LTC Cost? 

An important part of planning for long-term care is deciding how to pay for services. This is because long-term care is very expensive, and contrary to what many people believe, their Medicare coverage will not pay for most of the long-term care services they need. While some people may qualify for Medicaid – the major payer of long-term care services, most people won't. There are other federal public programs, such as the Older Americans Act, or state funded programs, that pay some long-term care services, but like Medicaid they target those people with the most functional and financial need. Consequently, if you are one of the 70% of people over the age of 65 who will need long-term care services – there's a very good chance you will have to pay for some or all of your long-term care services out of your personal income and resources.  

Paying for long-term care out of your personal income and resources can be challenging. Even if you have a modest need for assistance at home with personal care, say a visit from a home health aide 3 times a week, based on 2008 average costs, you would have to pay about $18,000 a year for those services.  

To make the best decisions about how to pay for long-term care you need to understand what services cost, what public programs you are eligible for and what they cover, what private financing options are available, and which ones work best for you.

 The average costs in the United States (in 2008) are:

·         $187/day for a semi-private room in a nursing home

·         $209/day for a private room in a nursing home

·         $3,008/month for care in an Assisted Living Facility (for a one-bedroom unit)

·         $29/hour for a Home Health Aide

·         $18/hour for a Homemaker services

·         $59/day for care in an Adult Day Health Care Center

Are My Premiums Taxed 

As of January, 1997, your premiums can be tax-deductible under the Health Insurance Portability and Accountability Act of 1996.  But you need to check with an accountant or financial planner with an elder-law specialty to see if a particular policy you are considering would qualify.

The Cost of Long-Term Care Insurance 

Long-term care is expensive. One year of care in a nursing home, based on the 2008 national average, costs over $68,000 for a semi-private room. One year of care at home, assuming you need periodic personal care help from a home health aide (the average is about three times a week), would cost almost $18,000 a year.

Costs for long-term care services vary greatly depending on the type and amount of care you need, the provider you use, and where you live. For example, many care facilities charge extra for services provided beyond the basic room-and-board charge, although some may have “all inclusive” fees. Home health and home care services are usually provided in two-to-four-hour blocks of time referred to as “visits.” An evening, weekend or holiday visit may cost more than a weekday visit. Some community programs, such as adult day service programs, are provided at a per-day rate, and rates may differ based on the type and variety of programs and services offered.

Who Pays For Long-Term Care Insurance 

Consumer surveys have revealed some common misunderstandings people have about which public programs pay for long-term care services. Many people believe they can rely on Medicare to pay for any long-term care services they will need. However, Medicare only pays for long-term care if you require skilled services or recuperative care for a short period of time. Medicare does not pay for what comprises the majority of long-term care services – non-skilled assistance with Activities of Daily Living.

Medicaid is the joint Federal and state program that pays for the largest share of long-term care services, but only if you meet financial and functional criteria. Other Federal programs such as the Older Americans Act and Veterans Affairs pay for some long-term care services, but only for specific populations and in specific circumstances.

Most forms of employer-sponsored or private health insurance, including Health Maintenance Organizations (HMO) or managed care, follow the same general rules as Medicare. If they do cover long-term care, it is typically only for skilled, short-term, medically necessary care. Therefore most people who need long-term care end up paying for some or all of their care on their own out of their income or assets.

There are, however, an increasing number of private payment options that help to cover the costs of long-term care services. These include long-term care insurance, reverse mortgages, and other options.

It is important to understand the differences among the public programs and private financing options for long-term care services. Each public program and each private financing source has its own rules for what services it covers, eligibility requirements, co-pays, and premiums.