ASK GINA: HOW TO PAY FOR LONG-TERM CARE?
As an estate planning and elder law attorney, nursing home and long-term care is a topic that comes up frequently with my clients.
According to a recent article from Jo Ann Jenkins, CEO of AARP, "nearly 70 percent of Americans who reach age 65 will someday require help from others to get through their day. On average women will need help for 3.7 years, and men for 2.2 years." This need for help may be filled by a combination of caregiving solutions, ranging from family, friends, neighbors, community centers, day programs, and senior living facilities to assisted living, memory care, or nursing home facilities.
While most people would rather avoid needing care in an assisted living or nursing home facility, the reality is that sometimes assisted living, memory care, or nursing home care is unavoidable. While it may be possible for family and support networks to handle care for a period of time, care needs or disease progression may necessitate some professional level of care at some point.
If that becomes the case, the question becomes how does one pay for the care? Many people wrongly assume that Medicare will pick up the tab. While Medicare may pay for some short-term rehabilitation (generally up to 20 days full coverage with partial payment up to 100 days) following a qualified hospital stay, Medicare is designed to pay for medical costs and does not cover long-term care. Which means if you need long-term care, you need to have a way to pay for it outside of your Medicare coverage.
Care is often paid for through a combination of the following:
Private Pay: This involves using your income and assets to pay for your care. You may use your income from Social Security, pensions, or retirement income and supplement with funds from your personal savings, investment accounts, or sale of your assets such as your home or other property. Basically you pay the bill as it comes due each month using the income and assets you have available.
Long-Term Care Insurance: If you have a long-term care insurance policy or rider in place, the policy may cover part of your care costs. The policies vary by company, so the exact coverage will depend on your specific policy. A traditional long-term care policy may be relatively expensive (considering its oftentimes "use it or lose it" nature) and have stringent underwriting requirements. But there are other types of "hybrid" policies or long-term care riders that may be a better option. I suggest discussing with your financial advisor or insurance agent to see if a long-term care policy is the right fit.
Medicaid: Medicaid, also called Title 19 or "Medical Assistance", is the state and federal program that covers long-term care costs for those with limited income or assets. This means there are certain asset and income limits before someone will qualify for Medicaid and the rules are different if there is a spouse living at home versus a single individual applying for coverage. There are also other rules that may restrict qualification such as giving away assets within a 5-year lookback period. Not all facilities accept Medicaid, and some require a period of private pay before accepting Medicaid. On the other hand, there may be planning techniques you can use to maximize the income and assets available to a spouse who is still living at home, for example, without depleting all of your assets. Medicaid qualification planning can be very complicated, depending on your goals and situation, and is best done with an experienced elder law attorney to avoid unintended financial consequences.
Other Resources: Qualifying veterans may receive long-term medical assistance, depending on VA enrollment and eligibility requirements based on income, disability level, and location. Other individuals may need to rely on assistance from family members or require short-term loans to pay for care while other assets are being liquidated.
Overall, it's never too early to think about and plan for how you'll pay for long-term care if the need arises. Even if you never expect to need long-term care, by discussing with your professional advisors like your financial advisor, accountant, insurance agent, and estate planning attorney, you'll have more options and understanding if the unexpected happens.
The information in this article is specific to Wisconsin law and general in nature. It is not intended to be legal or tax advice. Gina Ziegelbauer is an estate planning and elder law attorney at Steimle Birschbach, LLC, a law firm with offices in Sheboygan and Manitowoc. To have your question answered in the next "Ask Gina," email Gina Ziegelbauer at gina@steimlebirschbach.com.
