In the latest Weekly Wright Report:
- Nursing Home Care Expenses
Nursing Home Care Expenses
The good news is that we continue to live longer. Unfortunately, as we age, we will develop a greater need for some health care support. Nursing Home care costs are rising faster than inflation. According to the annual Genworth Cost of Care Survey, the median annual national cost of a private room in a nursing home facility was over $108,000 in 2021. Regionally, and even within a state, costs can exceed that median number.
Medicare does not cover long term nursing home costs except in limited circumstances such as skilled nursing care received for up to 100 days after a qualified inpatient hospital stay. Medicare does not cover what is called custodial care for services like assistance with bathing, dressing, using the bathroom, and eating. Medicare does not cover long-term nursing home care for dementia, Alzheimer’s Disease, Parkinson’s Disease or stroke.
Why Should I Care?
If you were certain that you or your spouse would require nursing home care for two or more years, you probably would do something to protect yourself. The difficulty of assessing the risk of needing nursing home care together with the staggering costs of nursing home care leads many people to do nothing. Research conducted by the Center for Retirement Research at Boston College reviewed 20 years of data on individuals age 65 and older. The research indicated that 20% of retirees required no long-term care support. Of course, that means 80% will require at least some level of minimal assistance. The research also indicated that 25% will experience a severe need. A severe need is defined as requiring extensive assistance for longer than three years.
As with most things, the degree of risk is somewhat dependent on socioeconomic factors. Married people can rely on their spouse for some degree of physical support. Minority populations tend to have poorer health thereby requiring greater assistance. Assessing your health risk is one part of the equation but equally important are your financial goals. If you are single with no children, you may be less concerned about spending all of your assets on your health care. If you are married, you may be concerned that a prolonged nursing home stay may seriously and permanently affect your spouse’s standard of living. If you have children, you may wish to protect a legacy for them to inherit at your death.
Programs Available to Help with Long-Term Care
Medicaid is the jointly funded state and federal program to assist indigent individuals pay for long-term care. An individual must have assets of $2,500 or less and monthly income below the monthly nursing home cost to qualify for Medicaid nursing home long-term care assistance. The Veterans’ Administration also offers some long-term care benefits for veterans and their surviving spouses.
Long-Term Care Insurance Policies are another option. Like automobile insurance that covers costs if you are in an accident and homeowners’ insurance which covers costs to repair your home, long-term care insurance policies cover costs associated with in-home or nursing home costs if you require such services. Like life insurance, the younger you are when you apply, the less expensive the cost. Applying for coverage after the age of 60 will be quite expensive and, if you have a health issue, you may be denied coverage. The concern with long-term care insurance is that, like automobile and homeowners’ insurance, you may pay thousands of dollars in premiums and never have a claim. A newer kind of policy is a hybrid combination of life insurance and long-term care insurance. This policy makes the death benefit available for costs of long-term care. If long-term care is required, the policy agrees to pay up to the limits of the policy coverage but this payment reduces the death benefit so no death benefit may be available. If you never need long-term care, the full death benefit is paid to your beneficiaries. These policies are more expensive than plain life insurance and, in some cases, more expensive than plain long-term care insurance because the insurer is assuming a greater risk, covering both health care costs and death benefits.
Other than insurance, personal savings can help to cover long-term care needs but substantial wealth is required to cover the costs from income alone. Still, having a large savings cushion will help cover some costs. Guaranteed payments from Social Security and defined benefit pension plans can also cover some of the monthly costs.
Wright, Constable & Skeen, LLP is not an insurance broker and does not sell insurance products. We do assist our clients with estate planning, estate administration and trust administration. If you have questions or require assistance with your estate plan, please contact Mary Alice Smolarek, firstname.lastname@example.org or an attorney in our Estates & Trusts group.