As we age, it can become difficult or impossible to do everything from cooking and cleaning to bathing and getting dressed on our own. Understanding the variety of professional services and living arrangements available to you or loved ones, along with the costs of these services, can help you plan for those needs.
Homehealth care is an option to help treat a medical condition or assist with physical recovery after an illness or accident. These services may be obtained from a nurse or aide hired through a nursing registry or home health agency (HHA).
Personal care and assistance with activities of daily living come (ADL) in several forms. Some home health agencies can provide suitable aides for personal care. Individuals who provide personal or household assistance can be found through various home care organizations or local classified ads. Guidance for determining what organizations and individuals may be available in your area may be found through your city or county Department of Social Services, Department of Human Services, or Council on Aging.
When it is no longer feasible to remain at home, it may be time to consider facilities that offer multiple levels of service in a central location such as retirement communities, centers for care, nursing homes and assisted living facilities.
Retirement communities are an example of centralized services. Families or individuals can live in a central location with similarly situated people. Their independence is facilitated by a menu of personal and household services close at hand.
Centers for care are community centers that provide care-giving services for an individual during the day. Interaction with other people is another benefit of elder care centers.
Costs for various services can vary tremendously across the United States. However, the following list provides average costs of services nationwide from the 2013 Genworth Cost of Care Survey:
|Type||Cost||5-year annual cost inflation|
|Custodial Care (Home)||$18/hr||0.84%|
|Home Health Aid||$19/hr||1.00%|
|Adult Day Healthcare||$66/day||1.61%|
|Assisted Living Facility||$3,450/month||4.26%|
Percentage increase represents the compound annual growth rate for surveys conducted from 2008 to 2013.
Research into the costs of these services locally can provide much more clarity.
Nursing homes provide full-time, round-the-clock care, including skilled nursing care. They are the most expensive of the facility options, because most residents need help with many aspects of their personal care and often have more advanced medical needs as well.
Assisted living facilities provide assistance with activities of daily living, physical therapy and other services for people with disabilities who do not need the round-the-clock care a nursing home provides.
It’s no secret healthcare costs are on the rise. Some experts estimate that long-term care expenses will continue to outpace general costs of living due to heightened demand from aging baby boomers.
Aside from using personal savings, the following are some ways to help protect your nest egg from the burden of long-term care expenses.
Medicare – Medicare benefits should be considered the first line of defense for covered medical expenses.
Check with your doctor or medicare.gov to see if expenses you or a loved one might face are covered by Medicare.
Long-term care insurance - Long-term care insurance (LTC) can help protect your savings from the rising cost of healthcare. The insurance benefit is usually expressed as a daily dollar amount. Most LTC policies include a maximum benefit amount that may effectively limit the duration of coverage. For instance, a policy offering a benefit of $100 per day with a benefit period of 365 days might cap total policy benefits at $36,500.
Benefits are typically triggered when the insured cannot perform some number of activities of daily living for a specified period of time referred to as the exclusion period. Most policies cover costs associated with long-term care services, whether the care is provided in-home or in a facility. Some older policies do not cover in-home care, so it’s important to know your policy benefits.
Medicaid qualification and coverage – In certain states, Medicare may also be a resource for long-term care expenses if you lack the resources or insurance to cover the costs.
Generally recognized Activities of Daily Living (ADL):
Medicaid is a joint state and federal program that can provide assistance to individuals who cannot afford long-term nursing home care. Each state administers its own program, including eligibility requirements, so rules differ from state to state. Generally, an individual applying for Medicaid benefits must spend down their available resources first. Financial records can be examined
going back five years to ensure the Medicaid applicant hasn’t given away their wealth rather than spend it on the long-term care needs.
A few safe harbors can allow a little more wealth to be maintained in many states, such as the home, a vehicle, some personal possessions and monthly income of roughly $2,000 per month. But some states limit the value of the home or require that the applicant be expected to return there from the nursing home in order for it to be exempt.
The administering agency may also try to recoup funds spent for long-term care from the value of the house once the individual passes away. Similar rules and limitations may apply to a vehicle or monthly income allowance.
If the Medicaid applicant is married, the spouse is also subject to the spend-down requirements. While the spouse may be able to keep some portion of their combined savings, this amount is only a little more than $100,000 in most states. On the other hand, the income received by the spouse may be fully exempt and a spousal allowance may be allowed from the applicant’s income as well.
Common tactics considered when trying to maximize leftover assets and income involve converting savings into lifetime income streams, typically through a process known as annuitization, or shifting savings into an exempt asset such as purchasing or improving the home. But the efficacy of these strategies depends completely on the state-specific rules surrounding Medicaid spend down as well as the assets and income of an individual or family. Seeking the advice of a qualified elder law attorney, ideally five or more years in advance of applying for Medicaid long-term nursing care benefits, is an appropriate step to take.
Start planning by determining the services available, including in-home care options. Research the costs of specific services available in your area. Add up the assets and insurance available to help you meet those needs. Consider whether Medicaid qualification is something for which planning is warranted. If so, contact a local elder
law attorney for specific help with this planning, ideally five or more years prior to needing Medicaid long-term care benefits. Together, this planning can remove the uncertainty and open up options related to caring for yourself or a loved one.
This article is for general informational purposes only. It is not intended to be used,and cannot be used, as a substitute for specific individualized legal or tax advice. Tax and other laws are subject to change, either prospectively or retroactively. Individuals should consult with a qualified independent tax advisor, CPA and/or attorney for specific advice based on the individual’s personal circumstances. Examples included in this article, if any, are hypothetical and for illustrative purposes only.
Advisory services provided by Advice and Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registered investment adviser. TIAA-CREF Trust Company, FSB provides investment management and trust services.
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