There are several types of long-term care arrangements for seniors, but the most intensive is a nursing home. This type of facility has a full-time nurse on site at all times and staff members provide the highest level of medical and personal care. Unfortunately, this level of care is expensive, and many seniors and their family members worry about how they will pay for a nursing home if the need arises. The following are six options to consider.
Medicare is a federal insurance program for citizens aged 65 and older, and it is designed to cover normal preventive and acute care. It is not meant to pay for long-term care; however, many people are able to pay for a short-term stay in skilled nursing care with Medicare benefits when the purpose of the stay is rehabilitation following surgery or an illness.
According to the rules of the federal Medicare program, patients are required to have been in the hospital for at least three days before entering a skilled nursing or rehab facility. Medicare will then pay 100% of the first 20 days and a portion of the cost for up to 100 days, as long as the rehab is deemed medically necessary.
Medicare benefits also cover auxiliary costs of long-term care, such as medical equipment and medications. For example, Medicare typically pays for a wheelchair, a hospital bed, oxygen, and other supplies prescribed by a physician. In addition, Medicare can pay for physical therapy and home health care provided during a nursing home stay.
While Medicare only covers a temporary stay, the Medicaid program will pay for ongoing long-term care in a nursing home. Medicaid is a federal assistance program designed to cover the medical costs of individuals in financial need. To qualify for Medicaid, a patient will typically need to have less than $2000 in assets and an income that falls below his or her state’s income requirement for eligibility.
It’s important to bear in mind that each state sets its own requirements for Medicaid eligibility and may place limits on what services Medicaid can cover. In most states, residents can earn up to three times the Social Security income limit and still qualify for Medicaid. In some states, Medicaid can pay for assisted living or in-home care, while other states limit Medicaid-covered long-term care to nursing homes.
Often, people find that they need to spend down their assets in order to qualify for Medicaid. Because there is a five-year look-back period, it can be helpful to begin preparing before the need arises. Fortunately, most states have laws in place that protect spouses from losing their homes, vehicles, and a certain amount of shared assets.
3. Long-Term Care Insurance
Some nursing home patients are able to pay for their care with long-term care insurance benefits. An individual can purchase a long-term care policy and pay monthly premiums until a need for care arises. Once he or she has met the criteria for long-term care, the premiums will cease and the benefit payments will be made directly to the facility.
One of the benefits of having a long-term care policy is that it can be used for any form of care deemed medically necessary. Thus, a policyholder can start using the benefits for in-home care and delay the need to move into a residential facility. Financial planners generally recommend purchasing long-term care insurance between the ages of 50 and 60.
4. A Life Insurance Policy
Unfortunately, the cost of long-term care policies has gone up in recent years, and it is becoming increasingly hard for people to qualify. For example, some insurance companies will reject applicants with pre-existing conditions like diabetes, heart disease, or dementia.
A more cost-effective solution for some is to add a rider to an existing life insurance policy, also known as advanced death benefits. A rider allows the policyholder to begin using a percentage of his or her death benefits to pay for long-term care. Most companies offer this option, and it usually increases the cost of the premiums by a small percentage.
A life insurance policy can be used to help pay for long-term care in other ways as well. For example, you can sell a policy for cash or use an accumulated cash value from a universal life plan to pay for care. When you sell a policy for the purpose of funding long-term care, you will not be subject to federal income taxes on the gain.
5. Veterans’ Benefits
Both veterans and their spouses may be able to qualify for veteran’s benefits to help pay for nursing home care. There are some restrictions on who can receive this benefit, and the application process can take several months. Furthermore, those who qualify will receive less than the cost of nursing care each month, but the benefit can help and is worth seeking if you are a veteran.
6. Private Pay
Finally, private pay may be an option. Some nursing home patients are able to use their investments, savings, and pension income to pay for their care. In some cases, adult children and other family members are also able to pool their resources to cover the cost of care.
Some people also supplement their savings by taking out a reverse mortgage on their home. This is a type of loan that is based on the value of the borrower’s home. The individual is free to use the money to cover care expenses, and the loan only comes due after he or she passes away, at which time the home is sold to repay the loan. A reverse mortgage can be a useful option especially when the home’s mortgage is paid off and the home itself has a high resale value.
The cost of long-term care is undeniably steep, but those who prepare in advance stand a better chance of affording a high quality of care when they need it. The sooner you and your family start planning, the more options you will have.