Q. My mother has Parkinson’s, and it is progressively getting more difficult for her to do things on her own. She has fallen several times and is having trouble swallowing. We have an aide who comes to help her, but this level of care likely won’t be enough for much longer. I know she will need around-the-clock nursing home care soon, but with what I heard it will cost, her savings would be diminished in less than a year. Is nursing home care as astronomically expensive as I am thinking, and, if so, how can my mother pay for it without spending everything she has worked her whole life to earn? Thanks for your help!
A. Millions of families are facing daunting life decisions when it comes to long-term care for a loved one. With the escalating costs of in-home care, assisted living facilities, and nursing homes, the savings and incomes of older Americans and their relatives are dwindling.
Rates have climbed considerably in recent years, a trend that will likely continue to accelerate over the next several years, according to Kaiser Family Foundation (KFF)’s “The Affordability of Long-Term Care and Support Services” survey and Genworth’s Cost of Care data. In fact, if projections hold, the monthly cost of a semiprivate room in a nursing home will be over $10,000 a month (on average in the US) by 2030, an increase of about one-third. For private rooms, expected annual costs already have passed the six-figure mark. The scary part is that we are already well beyond those amounts in the DC area. Many nursing homes in our area already cost $14,000–$16,000 per month!
The prospect of not having enough money to pay for long-term care looms as an imminent threat for the boomer generation, which vastly expanded the middle class and looked hopefully toward a comfortable retirement on the backbone of 401(k)s and pensions. Below are some stats from Dying Broke, an investigative series which used KFF polling, original analysis, and interviews with experts and impacted individuals and their families to examine the challenges facing families and caregivers in navigating long-term care.
- Roughly 10,000 people will turn 65 every day until 2030, expecting to live into their 80s and 90s as the price tag for long-term care explodes, outpacing inflation, and reaching a half-trillion dollars a year.
- By 2050, the population of Americans 65 and older is projected to increase by more than 50 percent, to 86 million, according to census estimates. The number of people 85 or older will nearly triple to 19 million.
- As Americans live longer, the number who develop dementia has soared, as have their needs. About 8 million people 65 and older reported that they had dementia or difficulty with basic daily tasks like bathing and feeding themselves — and nearly 3 million of them had no assistance at all, according to an analysis of survey data. Most people relied on spouses, children, grandchildren, or friends. The number of Americans with dementia is projected to grow to nearly 12 million by 2040!
- The United States has no universal system to pay for long-term care, with what we currently have being “mostly a patchwork,” according to The New York Times.
- The private market, where a small percentage of families buy traditional long-term care insurance, is not as popular as it once was. There have been giant rate hikes by insurers that had underestimated how much care people would actually use. Please note that more modern types of long-term care insurance, which are hybrid policies connected with a life insurance policy or an annuity, have premiums that do not go up over time. More about these types of policies will be explained below.
- Labor shortages have left families searching for workers willing to care for their elders in the home.
- The cost of a spot in an assisted living facility has also soared to an unaffordable level for most middle-class Americans.
- Medicare, the federal health insurance program for Americans 65 and older, does not cover the cost of long-term care. It only covers limited short-term stays in nursing homes for rehabilitation, such as when recovering from surgery, a fall, or a stroke.
Ways to Help Manage the Catastrophic Costs of Long-Term Care
According to a survey conducted by MoneyRates.com, nearly 57 percent of Americans believe a year in a nursing home would cost less than $75,000. Therefore, most people are in danger of saving less than is necessary to meet the need. Below are some options to help people afford the costs of LTC without going broke:
A Hybrid Long-Term Care Insurance (LTCI) Policy Is an Option
A hybrid policy (also called an asset-based policy or a linked-benefit policy) combines long-term care coverage with life insurance or an annuity. One of the potential benefits of hybrid policies is that your heirs will receive a death benefit if you do not use all of the LTC benefits. Another benefit of these policies, as explained above, is that premiums never go up. You can choose to pay a monthly premium or pay a premium for a term, such as 10 years, or, to get the biggest value for your investment, you can make a onetime premium payment so your policy is fully paid for, and you will never have to pay an additional premium. Another advantage of a hybrid policy is that you may be able to purchase an “extension” or “benefit rider,” which would allow you to receive monthly benefits after the base amount has been exhausted. This could double the time frame for receiving LTC benefits, or even provide you with lifetime benefits for a fraction of the cost of traditional long-term care insurance. Of course, hybrid/asset-based long-term-care coverage is not right for everyone, and there are many other asset protection strategies to protect your assets from the potentially devastating costs of long-term care. Be sure to make an appointment with Mr. Farr to learn more.
The Ultimate Safety Net for Many Americans Is Medicaid
Medicaid represents the largest single source of funding for long-term care. In fact, in 2020, KFF estimates that 4.2 million people used Medicaid long-term services and supports (LTSS) delivered in home and community settings, and 1.6 million used LTSS delivered in institutional settings. Medicaid.gov reported that about 11 million Medicaid enrollees used LTSS in 2019. KFF’s estimates differ from the number of people using Medicaid LTSS reported by Medicaid.gov — part of the Centers for Medicare & Medicaid Services (CMS) because CMS defines LTSS more broadly.
Long-Term Care Medicaid was designed not for poor people but rather for people who can qualify for it, which includes many middle-class and even upper-class seniors. When a loved one needs long-term care, Medicaid is the single largest payor of nursing home care costs because so many people can’t afford to cover the costs themselves. It is often imperative to the individual’s quality of life.
The significant costs of long-term care can impact retirement plans, savings, and assets, and the level of care one receives. That’s why it’s so important that people speak with a financial advisor and an experienced Elder Law attorney about their long-term care preferences and put a plan in place. We provide both of these services right here at the Farr Law Firm.
Medicaid Planning for Long-Term Care
Medicaid planning can be started while you are still able to make legal and financial decisions or can be initiated by an adult child acting as agent under a properly drafted Power of Attorney, even if you are already in a nursing home or receiving other long-term care. It is never too late to begin your planning.
To begin long-term care planning (and incapacity and estate planning) right away, please call us to make an appointment:
Fairfax Elder Law: 703-691-1888
Fredericksburg Elder Law: 540-479-1435
Rockville Elder Law: 301-519-8041
DC Elder Law: 202-587-2797
About Evan H Farr, CELA, CAP
