At some point, there will come a time when a loved one can no longer care for themselves. Dad may have suffered a stroke or a fall, or he may simply be getting older, and, over time, his frailty may result in chronic and debilitating physical or cognitive decline. At this point, families need to make decisions about long-term care and how it will be funded.
“It’s not easy when your family member is in crisis,” explains Maria Hood, director of admissions, United Hebrew of New Rochelle. “Maybe they’re in the hospital or they have just been sick or it’s the third time they have fallen. These are all very typical scenarios that prompt a call to us asking how we can help their parent and, equally important, how can they pay for this level of care?”
Hood notes that understanding the levels of long-term care and your insurance and private pay options before a crisis will leave you better prepared to protect your assets and fund long-term care for yourself or a loved one. Here, she explains the basics.
Three levels of long-term care
- Home care – Home care can be medical or non-medical. There are some forms of home care that give skilled nursing inside the patient’s home, and some forms of home care that assist with housekeeping, personal care, and other activities of daily living. Home care can also be offered as a 24/7 service or just a weekly visit; it depends on the patient and their needs. This option is preferred by people who need assistance but don’t want to leave their home. Depending on the level of care, home care can be the most expensive option of the three types of continuing care if the responsibility is beyond the scope of family members.
- Assisted Living – Assisted living refers to a type of housing arrangement for older adults or individuals with disabilities who require some level of assistance with daily activities, but do not require full-time skilled nursing care.
- Nursing Home – Nursing home care refers to a type of long-term residential care for individuals who require a high level of medical and personal care on a daily basis. Nursing homes, also known as skilled nursing facilities, provide 24-hour nursing care to individuals who cannot live independently due to age, disability, or medical conditions.
Six essential funding categories for Long-term care
Funding long-term care can be a challenge for many individuals and families, as these services can be expensive and are not always covered by health insurance or other benefits, explains Hood. Here are some common options for funding long-term care:
- Medicare and commercial medical insurance – Medicare is federal health insurance for people 65 or older, and some younger people with disabilities. Commercial health insurance is health insurance provided and administered by nongovernmental entities. It can cover medical expenses and disability income for the insured. Neither Medicare nor commercial health insurance are designed to fund long-term care.
- Long-term Care (LTC) insurance – Long-term care insurance policies can help cover the costs of long-term care services, including home care, assisted living, and nursing home care. These policies can vary widely in terms of coverage and cost, so it’s important to carefully review policy terms before purchasing.
- Private funds – Individuals or their families can pay for long-term care services out of pocket. This may include using personal savings, selling assets, or using retirement funds.
- Medicaid – Medicaid is a government-funded program that provides health care coverage for low-income individuals, including long-term care services. Eligibility requirements vary by state, but in general, individuals must have limited income and assets to qualify for Medicaid-funded long-term care.
- Veterans’ Assistance – Veterans may be eligible for certain long-term care benefits through the Department of Veterans Affairs (VA), including home-based care, assisted living, and nursing home care. Eligibility requirements and benefits can vary, so it’s important to check with the VA for specific information.
- Life insurance – Some life insurance policies offer long-term care benefits that can be used to pay for services such as home care or assisted living. This can be an option for individuals who have life insurance policies with cash value.
Breaking down insurance coverage and funding the cost of long-term care
“Many families are under the impression that Medicare will automatically cover long-term care for their parent in the home by an aide or in a skilled nursing facility, but that is simply not the case,” explains Hood.
“As an example, if a patient is referred to United Hebrew for sub-acute care, meaning they were discharged after an extended hospital stay due to surgery, illness or injury, but require additional inpatient care and rehab to fully recover, Medicare and medical insurance will fully cover their stay up to 20 days as long as the patient continues to meet the criteria for that condition,” adds Hood. “On the 21st day, coverage drops to 80% and the patient is responsible for paying the 20% difference – and that can be upwards of $100 per day.”
To cover the 20% differential, patients can purchase supplemental coverage from companies, like AARP or others.
Medicare and commercial health insurance policies will generally cover (for a limited time):
- Hospitalization and acute rehab
- Sub-acute nursing care
- Limited home care, such as a visiting nurse, physical, occupational and speech therapy
Upon discharge from an acute (hospital) or subacute (skilled nursing facility or rehab hospital) setting, Medicare and commercial insurance will cover a visiting nurse and physical therapy to the home if the patient is considered homebound. However, the patient will only be eligible for a home care aide if it’s in conjunction with the above skilled services and for a limited time – usually no longer than one month.
What you need to know about Long-term care insurance
As the name suggests, long-term care insurance is specifically designed to cover chronic conditions and disabilities, which render an individual unable to care for themselves for the foreseeable future, if ever. No other type of medical insurance is designed to cover long-term care, noted Hood.
“Think of a previously independent older person who suffers a stroke that results in a chronic condition. Dad may now need help showering, or he may get confused, lost, or disoriented and can’t leave the house,” explains Hood. “This is where a long-term care policy can help families to keep Dad at home with a companion covered by insurance.”
Hood emphasizes that LTC insurance is expensive, and most policies will carry an elimination period. “So, if one has a LTC policy, as soon as there is an indication that LTC is needed, the insured must contact the company to notify them of the need and activate the policy. Upon doing so, there is up to a 90 day wait until the insured may use that insurance to pay long-term care bills. In the meantime, they must pay out-of-pocket for homecare, assisted living or nursing home.
Says Hood, “Once activated, a basic policy will cover around $150/day. A policy with higher premiums may cover more services per day.“
What United Hebrew suggests: Review policy terms carefully prior to purchase. Look at your policy and understand what’s covered, activation, elimination periods, etc. Know what your medical insurance covers, especially as you get older, including nursing home care, hospitalization, and subacute rehabilitation.
If your economic circumstances may be described as middle-class or above and your loved one does not have a long-term care policy, you may have to fund long-term care through existing personal assets.
“I talk to families on a daily basis that lament about how hard their parent worked all their life and there’s no financial help for them, because they don’t understand the different funding categories and how to access them, if eligible,” says Hood. “The critical issue for these families becomes, how can we get mom or dad the care they need without losing all of their assets?
“The more money you can preserve, the more choices you have. We suggest contacting an eldercare lawyer that can help you understand your state’s rules, protect your assets, and obtain Medicaid. However, act early,” stresses Ms. Hood. “The rules are complicated and vary from state to state. Understanding your options for entrusting your home and assets will help to preserve them and enable you to transition from private pay to Medicaid for LTC.”
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Like any investment, it’s always better to start when you are young. It’s no different when it comes to investing in your care as you age. To reap the benefits in your golden years, make a habit of putting away a small amount from your paycheck regularly when you are young and healthy to pay for eldercare.