It is important to think ahead about how you will pay for long term care should
it be needed by you or someone in your family. While there are a variety of ways
to pay for long term care, they fall into four broad categories. These are self
insure, rely on family, government programs, and private insurance.
Some of us choose to self insure. Other self insure by failing to
plan at all. Self insuring may be a viable option, if you have the financial resources
to set aside sufficient funds to cover potential costs. Consider the following in
determining in self insuring is the right choice for you:
The amount of money you need to set aside to cover potential costs is quite
high. For a couple, setting aside enough to provide for up to 3 years care each
in a nursing facility would require over $400,000, assuming average national costs.
In some areas of the country, the cost would be significantly higher.
Funds set aside to cover potential long term care costs are not available for other
purposes.
If you do need long term care and use your money,
you might not be able to leave anything to your heirs (family or friends).
If you don't need long term care, you will still
have your money that you set aside for long term care needs. This money is yours.
You might be able to leave something to your heirs (family or friends).
Depending upon how funds are invested, there may be rules about when you can use
your investments for paying long term care. In some cases, you may have to pay a
penalty for withdrawing the money.
If you set aside enough money for your long term care needs, you can choose where
and how you receive your care.
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Many of us choose to rely at least in part on our families to pay
for care or to provide care directly. However:
Most of us do not want to be burden on our children or other family members.
Family members may not be financially able to pay for the needed care nor be able
to provide the needed care themselves.
If family members are unable to pay for needed care, you would still be responsible
to pay for care services.
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Many mistakenly believe that government programs provide sufficient
coverage for long term care. However, this is not the case.
Generally Medicare does not pay for long term care.
Medicare pays only only for medically necessary skilled nursing facility
or home health care. You must meet certain conditions for Medicare to pay for these
types of care. However, most long term care services do not meet the narrow definition
of what is covered by Medicare.
Most long term care is to assist people with support services such as activities
of daily living like dressing, bathing, and using the bathroom. Medicare doesn't
pay for this type of care called "custodial care". Custodial care (non-skilled care)
is care that helps you with activities of daily living. It may also include care
that most people do for themselves, for example, diabetes monitoring.
Medicaid is a State and Federal Government program that pays for certain
health services and nursing home care for older people with low incomes and limited
assets. For those with limited assets and who cannot afford the cost of private
insurance, Medicaid may be the only choice.
In most states, Medicaid also pays for some long term care services at home
and in the community.
Who is eligible and what services are covered vary from state to state. Most often,
eligibility is based on your income and personal resources.
Often you must spend down your personal resources (assets) before you qualify
for Medicaid. You may want to get more detailed information from your state Medicaid
office or an attorney before spending down your resources. Some people think that
giving their resources to a family member or friend will make them eligible for
Medicaid. There are certain rules for spending down your resources. States are required
to find out if any resources were given away before you get Medicaid. If a state
finds that resources were given away, the state must charge you a penalty. For example,
this penalty may be to stop paying for your nursing home care.
Coverage is limited to Medicaid licensed facilities with an available Medicaid bed.
Because of this, you may have no or limited choices about where care is provided
or by whom.
The quality of care provided to Medicaid patients approved facilities may
not be as high as that provided to private pay patients.
The amount received from Medicaid may not be sufficient to pay all your long term
care costs.
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Because of the significant drawbacks and risks of the other options
for paying for long term care costs, many are choosing to purchase private insurance.
The most common choice is long term care insurance, but other options are now available
and may make sense in certain circumstances.
Long term care insurance can help pay for many types of long term care, including
both skilled and non-skilled care as well as care at home, in the community or in
a care facility. A detailed review of long term care insurance is
available here.
In recent years, the insurance industry has responded to the need for alternative
means to finance long term care costs by introducing modifications to traditional
life and annuity products. These are generally designed to accelerate benefits that
otherwise would not be available until the policyholders death and making them available
to pay for long term care costs. A detailed review of life and annuity options is
available here.
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