What are your options to pay for Long-term Care

What are your options to pay for Long-term Care?

Long-term Care can be an expensive proposition that too few people are prepared for or understand. Unfortunately, most people don’t think about how they will pay for care until they are confronted by a serious health situation for themselves or a loved one. The worst time to start planning for Long-term Care is in the midst of a crisis because the options to pay for care can be complicated and take some time to access.

The three primary ways to pay for care are with Medicare, Medicaid, or Private Pay through insurance, savings, or assets.
  1. Medicare is an “age-based” program that will cover the first 100 days of rehabilitation care in a licensed skilled nursing facility upon direct discharge from a hospital.
  2. Medicaid is a “means-based” program which means to qualify an applicant must meet both standards of medical necessity and be a below-set asset and income levels below the poverty line. Applying for Medicaid can be a challenging process that requires the applicant to submit detailed medical and financial records. Medicaid will “look back” five years at financial records to make sure that assets have not been hidden or transferred to family members.
  3. Private Pay primarily comes from an individual and/or a family’s savings, insurance, assets, and income. People that are private pay can choose any form and location of care that they want.

Independent and Assisted Living, as well as most forms of Home Care, are primarily private pay. Nursing homes are primarily covered by Medicaid for people who can qualify. Skilled Rehabilitation and Hospice are primarily covered by Medicare.

Private Pay Options for Senior Living and Long-Term Care

Families need to do all they can today to prepare to fund long-term care. Additionally, protect themselves from both the financial costs and the possibilities of legal liabilities. There are actions that people can start taking today to prepare themselves for future costs. There are also long-term care funding tools that people can use to address an immediate need for care as well.

What are some of today’s options for private pay funding of long-term care?
  • Long-Term Care Insurance–Insurance policies that will provide a fixed monthly payment to cover approved forms of qualifying long-term care. Long-Term Care insurance can be purchased as a stand-alone policy or as a life/LTC hybrid policy. The younger and healthier a person is when buying a policy, the more affordable their premium rates and likelihood to qualify.
  • LTC Life Settlements–A Life Settlement can be used to fund a Long-Term Care Benefit Plan which is similar to a Health Savings Plan. This LTC benefit Plan is an irrevocable Bank Account that is professionally administered with payments made monthly to long-term care providers. Policy owners that use a life settlement to enroll in the Benefit Plan are able to immediately direct tax-exempt payments to cover their senior housing and long-term care costs.
  • Veteran’s Aide & Attendance Benefit–Veterans of active combat duty and/or their spouses are eligible to receive monthly benefits paid directly towards qualifying long-term care service.  Like Medicaid, the applicant must meet both medical necessity and income/asset level requirements to qualify.
  • Reverse Mortgage–Homeowners with little to no remaining mortgage balance that are age 62 or older can qualify to take a HUD-backed Home Equity Conversion Mortgage (HECM) loan against the home in the form of a lump sum, monthly income or a line of credit. To qualify the home must still be the primary residence and the loan must be paid back with interest and fees after the homeowner dies (typically through the sale of the property).
  • Senior Living Loans–Loans that can be secured specifically to pay for long-term care services. These loans are unsecured by collateral and instead are guaranteed by family members who co-sign (one or more). Interest rates are similar to a credit card and the loans are typically between $50,000-$500,000 for a term of one year or less.
  • Medicaid Compliant Annuity–A single premium immediate annuity purchased to set up a guaranteed income stream for a spouse while the annuitant qualifies to go onto Medicaid and into a nursing home. It is an irrevocable annuity established for a period equal to or less than the remaining life expectancy of the annuitant. The state is named as the remainder beneficiary to receive any funds after the annuitant dies.
The key to successfully navigating any long-term care situation

Make sure you understand your financial options. Moreover, understand the differences between what will be covered by Medicare, Medicaid, or Private Pay. Planning and informing yourself as far in advance as possible is best. However, there are also a number of funding options available that can help people address a sudden and immediate need for care.

It’s never too late to start planning for a well-balanced retirement. Listen to my podcast, Retirement Genius where you hear about investing and retirement planning to help you achieve clarity, confidence, and freedom as you prepare for and transition into and through retirement.