Article of the Week: Paying for Long-Term Care – Can it be done?

Ben A. Neiburger, JD, CPA
Neiburger Law, Ltd.
Elmhurst, Illinois  60126
630-782-1766

Member of the national ElderCare Matters Alliance, Illinois chapter

In my elder law practice, a frequent topic of conversation with my clients is how to pay for long-term care.  This is an understandable concern given that many long-term care facilities in Northern Illinois charge between $6000 and $8000 per month for care – that’s $72,000 to $96,000 per year!).  A typical married couple in their 70’s may have only $50,000 to $200,000 in life savings plus their home.  This means that if one spouse needs to spend some time in a long-term care facility, he or she could burn through the couple’s life savings in a year or two – a very scary thought. 

The need for long-term care begins when people lose the ability to manage some of their “activities of daily living.”  An activity of daily living is a basic task that someone does in everyday life, such as eating, bathing, dressing, toileting, and getting in and out of chairs and beds.  As a person loses these activities of daily living, and their loved ones can no longer help because of their own health issues or time commitments, the person must look outside the home for help.  Since full-time home healthcare costs are also high (between $90 and $250 per day—or $2700 to $7500 per month), many people leave their home and enter a long-term care facility such as nursing home. 

There are four ways to pay for long-term care: long-term care insurance, pay with your own savings, Medicare, and Medicaid. 

I always recommend to my clients to obtain long-term care insurance if they can.  It is one of the best ways to pay for your care and may even enable them to receive long-term care in their home.  Unfortunately, long-term care insurance has only started to become popular in the last few years and most people facing a nursing home stay do not have this coverage.  

Although, long-term care insurance is one of the most desirable options for paying for long-term care, long-term care insurance has some disadvantages.  It can be so expensive that many seniors cannot afford to pay the premiums.  Many people who have long-term care insurance have not purchased enough coverage.  People may have a policy that pays $100 per day for care when their care actually costs $200 to $250 per day.  Unfortunately, some people cannot purchase long-term care insurance even if they could afford the premiums.  Many insurance companies that offer long-term care insurance policies are now applying very strict underwriting requirements.  This means that, generally, they will not offer a long-term care policy to a senior who is not in good health.  

While most seniors do not have long-term care insurance, most do have Medicare coverage.  Medicare is the national health insurance program primarily for people 65 years of age and older.  Medicare provides short-term assistance with nursing home costs, but only if a person meets strict qualification rules.  In any event, Medicare will only cover a short nursing home stay – it generally will not cover a stay that is longer than three or four months. 

A senior who will be in a nursing home for more than three or four months must soon look for other financing sources when his or her Medicare runs out.  Frequently, this means using his or her savings to pay for care and maybe selling the home to raise these funds.  Unfortunately, few people can afford a long-term stay in a nursing home at a cost that can be as high as $96,000 per year or more. 

The last option that seniors have in paying for long-term care is enrolling in Medicaid.  Medicaid pays for more than half of the long-term care costs in the U.S.  Medicaid is a Federal- and State-funded and State-administered medical benefit program that can pay for the cost of the nursing home if a person meets certain strict asset and income tests.  The Medicaid program is typically the program of last resort.  However, with proper planning, it may be possible for a person to both qualify for Medicaid and conserve some of his or her assets for their spouse, children, or grandchildren. 

Paying for long-term care is a major concern for seniors.  It can potentially wipe out a couple’s life savings.  However, with advanced planning, such as purchasing long-term care insurance or properly using the Medicaid program, a senior can receive the long-term care he or she needs at a cost that will not deplete a life’s worth of savings.