Long-Term Care Options: Paying for Long-Term Care

by Cranfill Sumner & Hartzog LLP
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Cranfill Sumner & Hartzog LLP

As a younger person, your fitness may have been at its all-time peak. However, the growing number of candles on your birthday cake may impact your health, wellness, or your ability to meet your care needs or a family member’s care needs. Will you be ready?

As people age, their ability to perform one or more of the most basic “activities of daily living” (ADLs) may become challenging. These ADLs often include bathing, dressing, eating, toileting, mobility, performing household chores, meal preparation, or managing finances. Consequently, over time, some people may require some form of outside assistance to perform these ADLs, whether in the safety and comfort of home or in a long-term care facility.

Long-term care facilities like assisted living or skilled nursing care can be expensive. In 2018, the national median annual cost for home health care was $48,048 for homemaker services and $50,336 for a homemaker health aide. For assisted living, you could expect to spend $48,000 annually for a private one-bedroom apartment. Skilled nursing care runs even more at $100,375 for a private room. Clients often wonder whether they have sufficient means to pay these bills and for how long those funds will sustain them or a spouse in a care facility. Often, clients who don’t have the means to pay indefinitely for the requisite level of care, reach out to elder law attorneys for help in navigating the available options.

Do-Nothing Default

Many people think that the need for long-term care won’t be relevant for their particular circumstances. This line of thinking usually stems from their perception of familial longevity and genetics, or the notion that females outlive males, or just the sense that it’s always “other people” who need long-term care. However, if denial is your default strategy for planning for long-term care, the odds are not necessarily in your favor. Roughly 70 percent of Americans over age 65 will require some form of long-term care. Unless you have a plan in place to pay the very real costs of care, the only thing your children may inherit is you.

Veterans’ Benefits

Cranfill Sumner & Hartzog LLP is always happy to thank veterans for their heroic military service. The federal government has also thanked veterans for their service by reserving funds to help defray the cost of long-term care. Certain qualifying veterans who have served during a war-time and their spouses may be eligible for needs-based benefits. These benefits may include a special pension referred to as “Aid & Attendance” or other needs-based benefits administered by the Department of Veterans’ Affairs. The special pension is not automatic and a veteran or a veteran’s spouse must apply for this benefit. This pension has asset and income limits. Because eligibility is “needs-based,” the VA will penalize any gifts and other transfers of resources for less than fair market value that occurred in the three years prior to applying for needs-based benefits.

Insured Alternatives

You likely have insurance to protect your assets and cover any potential risks to your automobile, home, and life. Long-term care insurance (LTCi) is another way to cover the potential and catastrophic costs of long-term care. These LTCi policies may pay for in-home care, assisted living care and skilled nursing care. There are “traditional” LTCi policies that pay a daily amount for a designated length of time or up to a specific maximum dollar amount. There are also “hybrid” LTCi policies that operate as life insurance policies with death benefits or with a long-term care rider. While eligibility for a LTCi policy may require relatively good health, you may not need a lifetime policy to pay for your care. Instead, elder law attorneys often recommend securing a LTCi policy that will last for 3-5 years. This is good news if you don’t want to pay the premiums of a lengthy LTCi policy. Instead, with these shorter LTCi policies, elder law attorneys use LTCi policies as tools for long-term care planning to achieve maximized asset protection.

Pay Privately

When people do not carefully plan for long-term care or the need for care becomes imminent, often the only option available is to spend their money for their care needs. This private-pay option is least appealing to clients because it requires them to spend their hard-earned money for an unlimited duration until the money either runs out (when they might qualify for other public benefits) or when they pass away. This option does not leave many funds available for a healthy spouse who may remain at home, nor does this option allow for a person to pass any legacy gifts to loved ones as inheritance.

Medicare & Medicaid

Eventually, if a person’s funds are depleted on their care needs, that person may become eligible for public benefits. Unfortunately, most seniors believe that Medicare will pick up the tab for their long-term care. If this is your plan, you will be fairly disappointed. Medicare only provides limited coverage for certain skilled care in certain care settings, such as rehabilitation facilities, and only for a limited duration, but Medicare does not provide for assistance with the activities of daily living on a long-term basis.

Medicaid does cover custodial care at the skilled-nursing level; in North Carolina, a program called Special Assistance covers care at the assisted living level. Eligibility for these programs can be subject to strict income and asset limits. Although many people try to get around these limits, by transferring assets to family members, any such transfers made within 60 months of applying for Medicaid will trigger a penalty period of ineligibility. The timing of a person’s application for public benefits can be critical based on a person’s needs, assets, and any transfers or gifts.

With the range of options available, what’s your strategy for long-term care? There’s no reason to leave your long-term care plans to serendipity. Thoughtful and careful planning can protect and preserve certain assets, while bringing a peace of mind to you and your family for your long-term care coverage.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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