Paying For Long Term Care

Steve Vernon’s excellent series of articles about long term care continues to be a great resource for people who are considering their options with regard to what sort of care they might need at the end of life, and how to go about paying for needed care.

Obviously, not all of us will end up needing $70,000/year nursing home care.  But most of us will need at least some sort of assistance with daily living as we get older.  Ignoring that fact will not change it, but it will make us less prepared, both emotionally and financially, if we do end up needing some type of long term care.

Steve Vernon’s article today about strategies for dealing with the cost of long term care includes seven possible solutions.  Relying on friends and family is one option, but the caregiver may have to take time off work or give up other activities in order to provide assistance.  They may be perfectly happy to do so, but to think of this as a free solution to long term care needs is misguided.

Relying on Medicaid is another possibility, but it requires that your assets be used up before Medicaid kicks in, and the options for long term care funded by Medicaid aren’t all-encompassing.  They are limited to nursing homes (EDIT: Colorado also has a Medicaid waiver that allows elderly people access to in-home care if they are eligible for Medicaid and have functional impairments that would otherwise qualify them for nursing home care.  The waiver is called the Home and Community Based Services waiver for Persons who are Elderly, Blind, and Disabled), and not all nursing homes accept Medicaid (understandable, as the reimbursement rate from Medicaid is much lower than what nursing homes get from private long term care insurance companies and patients who are paying for their own care).

Obviously, purchasing a long term care insurance policy is a good option, but it’s not the choice that everyone picks, and Steve details a few other possibilities that people with significant assets can use.  They all involve saving large amounts of money (either in cash or home equity) that is specifically earmarked for long term care expenses and not touched for any other purpose during retirement.  The advantage to this sort of strategy is that if you don’t end up needing long term care, the assets can be passed on to your heirs.  But the downside is that you have to be able to accumulate a large amount of cash in order to shield yourself against financial devastation if you do end up needing significant long term care. 63% of workers over the age of 55 have less than $100,000 in retirement savings, so adding the need to save an additional large sum of money specifically designated for long term care needs might not be realistic for most people.

Whatever option or combination of options you pick, the most important factor is to address the issue and come up with a strategy.  Many people are facing the imminent prospect of long term care needs for their parents in addition to their own future needs.  Now is a good time to discuss your strategy with your loved ones and come up with a plan.  If you’re in Colorado, we’re be happy to help you review the options that are available for long term care insurance to see if they fit your needs and budget.

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