“You don’t stop laughing when you grow old; you grow old when you stop laughing.” – George Bernard Shaw, 1856-1950
Question: What is the difference between Medicare and Long Term Care (LTC) Coverage?
Answer: Mistakenly, many people believe that Medicare, the federal health insurance program for older Americans, will pay for all LTC needs. The truth is that Medicare does not cover custodial care, which is usually the kind of care older Americans need. Medicare only provides limited coverage for skilled nursing care or physical therapy.
The most common and preferred type of LTC is provided in the home although ongoing services and support needed by those with chronic health conditions or disabilities can be provided in other settings, such as assisted living facilities and adult day care centers. The nursing homes of yesteryear are far less prevalent today. Here are descriptions of the three levels of long-term care:
Skilled care: Generally round-the-clock care given by professional health care providers such as nurses, therapists, or aides under a doctor’s supervision.
Intermediate care: Also provided by professional health care providers but on a less frequent basis than skilled care.
Custodial care: Personal care and assistance with “activities of daily living” such as bathing, eating and dressing which is often given by family caregivers, nurses’ aides, or home health workers.
Planning for the possibility of needing LTC is an important puzzle piece for your comprehensive financial plan for two reasons:
1) The odds of needing long-term care are high:
Approximately 40% of people will need LTC at some point during their lifetimes after reaching age 65. According to the Alzheimer’s Association, 14% of people age 71 and older have Alzheimer’s disease, a disorder that often leads to the need for nursing home care. In addition, younger people may need LTC too, due to a disabling accident or illness.
2) The cost of long-term care is rising:
Currently, the average annual cost of a 1-year nursing home stay is $74,820 and in many states, the cost is much higher. In the future, LTC is likely to be even more expensive. If costs rise at just 3% a year (a conservative estimate), in 20 years, a 1-year nursing home stay will cost approximately $135,133.
The Rising Cost of Long-Term Care
National Clearinghouse for Long-Term Care information, U.S. Department of Health and Human Services, 2011.
Medicaid, which is often confused with Medicare, is the joint federal-state program that two-thirds of nursing home residents currently rely on to pay some of their long-term care expenses. However, to qualify for Medicaid, you must have limited income and assets, and although Medicaid generally covers nursing home care, it provides only limited coverage for home health care in certain states.
Pay your own way
The major advantage of using income, savings, investments, and assets (such as your home) to pay for long-term care is that you have the most control over where and how you receive care. Because the cost of long-term care is high, you may have trouble affording extended care if you need it and will certainly erode assets.
Share the load
LTC coverage protects you against a specific financial risk–in this case, the chance that LTC will cost more than you can afford. LTC coverage can help you preserve your assets and provide access to a range of care options. There are many types of coverage available today in response to the needs of our aging population. Your financial advisor can help you compare long-term coverage options and answer any questions you may have.
When working with clients we often ask the question; “Who would you like me to contact if something were to happen to you?” or, “Who should I expect to hear from if your situation changes?” Most of us have an “alpha” child, relative, or friend who would step up and take control if we couldn’t act for ourselves. This person, along with your advisor, are the people to talk with when aligning your goals and plans.
While families gather during this holiday season it may be the perfect time to discuss long-term care planning with parents and/or adult children. Understandably, many people put off planning for long-term care. It’s hard to face the fact that health problems may someday result in a loss of independence, but if you begin planning now, you’ll have more options available in the future. Stay focused and plan accordingly.
Opinions expressed herein are those of the author and subject to change at any time. Information obtained from outside sources is believed to be reliable.
“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame design) in the U.S.”
Darcie Guerin, CFP®, is Associate Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email firstname.lastname@example.org. www.raymondjames.com/Darcie