The aging population in the United States is steadily increasing, with many seniors reaching an advanced age while facing the challenges of aging. Although not everyone may require living in a nursing home, many individuals may eventually find it necessary.
Data from SingleCare shows that approximately 70% of seniors will need long-term care (LTC) in the future. Other individuals who are not seniors, including adults with illnesses or disabilities, as well as children with special needs, may also require long-term care.
The costs of long-term care vary significantly depending on the location. The average prices for long-term care in some states can be tens of thousands of dollars higher than in others.
According to RetireGuide data, Alaska has the highest nursing care costs, with an annual average cost of $176,247, which is 136% higher than the national average. On the other hand, Louisiana has the lowest nursing care costs, with an average of $54,105 per year, with home care costs at $44,616.
Due to the high costs associated with long-term care, many individuals, especially those with low incomes, may find it unaffordable. While obtaining benefits through certain channels may be complex, there are multiple avenues to secure funding for long-term care.
Purchasing long-term care insurance is a common method of preparing for long-term care costs, but it may not be affordable for most people. Another option is to purchase coverage for only a portion of the costs to alleviate the overall burden.
Another approach is hybrid life insurance policies that include long-term care riders. Once the need for nursing home care arises, a portion of the policy amount can be used to cover care expenses.
Although Medicare and Medigap can cover many medical needs of seniors, long-term care is not included. According to Healthline, Medicare Part A covers short-term care for up to 100 days after meeting the inpatient requirements. During the rehabilitation period, Part A may cover care from skilled nursing facilities or provide home care. If one’s life expectancy is less than six months, it can cover all end-of-life care expenses.
Most individuals in need of long-term care rely on Medicaid to cover some or all of the costs. Since Medicaid primarily assists low-income individuals, your financial situation will be evaluated before you qualify for approval.
Medicaid has income limits, and most individuals must spend down their assets and reduce income to qualify. Specific amounts vary by state, but typically, the income limit for individuals is $2,000 per month and $3,000 for couples.
Not all nursing homes accept Medicaid, and some facilities only accommodate a limited number of Medicaid residents. The positive aspect is that there is no limit to the duration of care required, although only non-medical services are covered, and you do not have to pay the shared payment.
Applying for Medicaid requires individuals to spend down their assets. This involves liquidating your assets to become impoverished.
According to OurParents, your assets cannot exceed $2,000. Some assets, such as your primary residence, a car, personal belongings, and certain trust funds, are not counted.
When handling assets, it must be done in a specific manner. Medicaid will look back five years from your application date to see how you managed your assets, and many common practices are not permitted. According to ElderCareResourcePlanning, the following actions are unacceptable:
– Giving gifts or buying gifts
– Selling items below market value
– Transferring ownership of a house or car
– Donating to someone’s education, charity, or church
– Paying someone else’s bills
– Lending money to others
Violation of the above rules would result in the state government calculating the total amount of your infractions and determining how many months of nursing home expenses those funds can cover. During this period, you will not receive any assistance from Medicaid and will have to cover the costs yourself.
Medicaid waiver programs are state initiatives that provide home or community-based services (HCBS) to individuals who need nursing home care but cannot afford it. This allows them to receive similar services at home or in community care facilities. Depending on medical conditions and required care, financial assistance from both Medicaid and Medicare may be possible.
According to Healthline, waiver programs are controlled by the state where you reside. Since this program is not a right, state governments may limit usage by placing individuals on waiting lists.
Veterans are eligible for certain benefits to help them access nursing home care or services tailored to their specific needs. The Department of Veterans Affairs operates long-term care facilities in most states. They also offer home care, assisted living centers, adult day care centers, among others. Veterans Affairs may require copayments or additional assistance from Medicare or Medicaid.
If a homeowner has sufficient home equity, they may use reverse mortgage loans to pay for long-term care costs. This can be used to cover nursing home expenses and may even provide some extra funds.
With a reverse mortgage, a fixed amount is paid to the homeowner monthly based on the home’s equity. One spouse must reside in the house, and when no longer needed, the house will be sold to repay the debt. Like a conventional loan, the homeowner must pay interest and maintain the property. Homeowners are also responsible for insurance and taxes.
When in need of financial assistance and unsure of how to raise funds for a loved one’s nursing home care, consulting a financial planner or government service agency is advisable. If you plan to use Medicaid, preparing at least six years in advance— or even longer— is necessary.