For those thinking that assisted living is in their future, finding a way to pay for it is a primary concern. Long-term care insurance is one option which is available. This type of policy will cover the cost of assisted living, nursing home care or home health care for those who live with a chronic condition or disability and can no longer care for themselves. However, not everyone is eligible for long-term care insurance, typically those with certain existing health problems. Others may find it cost-prohibitive, as it gets more expensive the older the individual gets. The annual premium for the same coverage can nearly double from age 65 to age 75.
Fact: The Department of Health and Human Services reports that 70% of individuals who are 65 today will need some form of long-term care in the future.
The plans became popular in the 1990s and early 2000s, but insurers made faulty assumptions about the number of claims which may be made, as well as the number of policies that would lapse, reducing residual income. Insurers also did very little underwriting to determine risk factors. All of these missteps caused premiums to spike dramatically, making the policies nearly impossible to attain for most. Today, insurers have fixed the early problems, and premiums are expected to be much more steady and predictable. Still, may find long-term care premiums too pricey for their situation.
Sadly, although many assume Medicare can help, this is rarely the case. Medicare typically will only pay for a nursing home or assisted living after a hospitalization, and for a limited period of time. Therefore seniors have looked for other ways to pay for senior living accommodations, should they ever be necessary.
Alternatives to Long Term Care Insurance
- Group Long-Term Care Insurance: Some employers offer group long term insurance coverage as an option to their employees, and may help to cover some of the costs.
- Short-Term Care Insurance: These plans are similar to long term care policies, but are more affordable and capped at one year. This may be the right choice for older seniors.
- Life/Long-Term Care Insurance: Some life insurance policies offer long term care riders which allow seniors to take up to half of their death benefit for long term care expenses. As this option has grown in popularity, life insurance companies have expanded their options and programs.
- Health Savings Accounts: Also known as health IRAs, HSAs allow an individual to put money aside tax-free for medical costs, including long term care.
- Veterans Benefits: Veterans with a service-related disability may qualify for access to long term health services through the Department of Veteran’s Affairs. These government programs can be complex; however they do offer compensation to family caregivers.
- Home Equity: Many seniors have significant equity in their home, so tapping into this resource via a line of credit or home sale to pay for assisted living may be the right option.
- Pensions or Social Security: The viability of this option depends solely on the size of monthly payments and the cost of the required care.
Finally, although Medicaid is technically an option, it really is a last resort. If an individual has exhausted all their options and has no way to pay, the state can step in and pay for care. However, the types of facilities which the cover
– and the number of facilities which accept Medicaid -are limited, and give the individual and their family little choice. Also, the estate will be required to pay back the money.
If you are considering the move to assisted living, we invite you to come visit us at A Banyan Residence in Venice. We are happy to discuss all of your financial options and help you to make the best possible decision for you and your loved ones.