Strategies for Long-term Care
Aside from Medicare and Medicaid, here are five strategies to deal with the need for long-term care. Keep in mind that some long-term care strategies can be combined together. You’ll need to thoroughly investigate the options that best fit your individual needs. And, as you would expect, there are advantages and disadvantages with each solution:
Do Nothing: Literally, don’t do anything about the risk of needing long-term care during your lifetime. Maybe you’ll be one of the “lucky 30%” who will never need home healthcare or spend time in an assisted living facility or a skilled nursing facility (traditionally called a “nursing home”). The advantage of this approach is you won’t waste any time (or spend any money) dealing with this issue. The disadvantage, of course, is that you and your family will be completely unprepared for the costs and stress of getting the care you might need, and the level of care you deserve.
Get Help at Home: You can arrange for a health aide to come into your home. While you might need to make some adjustments, you can stay where you are the most comfortable, and that’s a huge advantage. You remain in control! You maintain your independence (and nobody needs to know about your secret stash of Hershey’s Kisses®). Disadvantages include the uncertainty of someone coming into your home and the high cost associated with home health care. Less than 24-hour care could be risky when your health deteriorates.
Move In With the Kids: Pay to modify their house or help them buy a larger home if necessary. They don’t call it a “Mother-in-Law Suite” for nothing. There are many advantages, such as the obvious trust and comfort level with family. Costs are low, except for home modifications and the possibility of professional assistance at some point. The biggest disadvantage is reality: the kids might live hundreds of miles away; you might not get along with your daughter-in-law or son-in-law or your family may have other challenges and obligations, like small children and demanding jobs.
Buy into a CCRC: You’ll pay an entrance fee plus monthly fees if you want to join a Continuing Care Retirement Community. Full service and flexibility are two big advantages. They are set up to handle the different levels of care you might need, from independent living (a home or an apartment on the property), all the way through to a skilled nursing facility. On the downside, there are so many choices that it can be overwhelming, plus, you still have to come up with the cash to pay for these accommodations.
Get Long-term Care Insurance: The best time to look into long-term care (LTC) insurance is yesterday. When the hurricane or tornado is bearing down on your house, the insurance company isn’t going to sell you a wind damage policy! Don’t wait until you need care to try to buy long-term care insurance. You’ve got to get it while you are healthy. You don’t know how healthy you will be a year from now, but you do know how healthy you are today. An insurance company will not issue a policy if your health is declining. I usually tell anyone over 50 to consider long-term care insurance. Why? It isn’t just for seniors. 40% of those currently receiving long-term care are adults between 18 and 64 years old (according to a 2010 report from HHS Clearing House). Also, the premiums go up every year with age. You can lock-in a much lower premium at 60 than if you wait until you are 70.
There’s an added bonus with LTC insurance. The 2005 federal Deficit Reduction Act authorized the states to establish a “Long-Term Care Insurance Partnership” program (according to Florida’s Office of Program Policy Analysis & Government Accountability). This “LTC Partnership” program is intended to alleviate the financial burden on state Medicaid programs by encouraging individuals to purchase private long-term care insurance. In return for purchasing insurance, a portion of the policyholder’s assets will be ignored when determining eligibility for Medicaid. The program lets you retain one dollar in assets for each dollar of long-term care insurance benefits paid by the policy. For example, the typical asset limit for an individual applying for Medicaid is $2,000. If a Medicaid applicant received $100,000 in benefits from a partnership LTC insurance policy, they may retain up to $102,000 and still qualify for Medicaid.
Find an experienced, independent insurance agent who can help you evaluate the LTC insurance choices. Some policies are very expensive, and some are suspiciously cheap. Some cover only certain types of care, while others cover just about everything. Some will actually let you cancel and get all your premiums back. Some have a death benefit for your family if you never use the policy. Lastly, some even allow you to make a “once-and-done” premium payment. A good long-term care insurance policy can reduce the potentially catastrophic impact that an extended stay in a facility would have on your finances and on your family. That’s great peace-of-mind − so is the knowledge that you can pay for the care yourself!
David D. Holland, a CERTIFIED FINANCIAL PLANNER™ practitioner, hosts a weekday radio show at 9AM on AM1380 Ormond Beach, AM1230 New Smyrna Beach and AM1490 Deland. He has also authored two books in his Confessions of a Financial Planner series. Holland offers investment advice through Holland Advisory Services, Inc., a registered investment adviser in Ormond Beach. He can be contacted at (386) 671-7526. Email your financial questions to info@DavidHolland.com.