As baby boomers continue to age, more and more Americans will need nursing home or in-home care. What many people don’t realize is that Medicare will not pay for it (although it may pay for short nursing home stays or brief periods of home care if you meet certain requirements). That means you’ll need to come up with a plan to pay for it yourself should you need care long-term. Here are your options for covering your long-term care costs, along with some cost-saving tips:
Personal savings. According to the AARP, the average cost of a nursing home is $50,000 per year (costs vary by state), and those rates are continuing to rise. Although recent data from the American Association for Long-Term Care Insurance shows that the average nursing home stay is around two years and three months, many people reside in nursing homes for as long as five years, and some for even longer. At today’s rates, for an average length of stay, you’ll need around $112,499 to cover your nursing home costs. For a five-year stay, you’ll need around $250,000.
Long-term care insurance. Rates for long-term care insurance vary depending on your age, current health status and type of coverage. The average cost of long-term care insurance for a single person who is 55 years old and in good health is $2,007 per year ($2,466 for a couple). Prices will be higher if you wait until you’re older to buy a policy, and premiums may increase as you age. Long-term care policies usually pay a certain amount of money per day. The amount covered is based on the average price of nursing home care when you purchase the policy, so you will want to make sure to get a policy with an automatic yearly increase in the amount that will be paid per day.
Reverse mortgage. A reverse mortgage is a loan that will pay you a set amount of money each month from the equity in your home. If your long-term care expenses exceed the amount of equity you have in your home, or if you outlive the length of your reverse mortgage, you will have to sell your home to pay back the loan; otherwise, no repayment is required until you are no longer living in your home. To qualify for a reverse mortgage, you must be at least 62 years old, own your home outright (or have a low mortgage balance that can be paid off at closing with proceeds from the home) and you must live in the home.
Medicaid. In order to qualify for Medicaid, you must first spend almost all of your personal assets (savings, stocks, bonds, etc.). You are not allowed to give them away to family. If you’re married, you will have to spend down your assets, but your spouse will be able to keep about half of your combined total assets (up to a certain amount), the family home, one vehicle and some personal income. Medicaid pays for nursing home care, but may not pay for in-home care. Medicaid laws vary widely by state, so you’ll need to check with your state Medicaid office to find out the eligibility rules where you live and what is covered.
Tips for saving on long-term care
Here are a few cost-saving tricks we learned when my mom was ill:
Hire non-agency home care workers. My mom had Alzheimer’s, so she needed 24-hour care. The cost for agency care was between $350 and $450 per day. We were able to find two skilled non-agency home care workers who were willing to work for $195 per day (one worked four days each week; the other worked three). Mom’s long-term care insurance policy paid $190 per day, so my dad’s out-of-pocket costs were $5 per day (around $150 per month). However, if you’re thinking of hiring a non-agency worker, make sure you do your homework. Get recommendations from friends, ask for references and call each one, and make sure you do background checks.
Call hospice. Hospice will only assist you if you have been given a diagnosis of six months or less to live, so many people are afraid to call hospice because it makes them feel as if they’ve given up hope (my dad waited to call until the doctor told him my mom may not live through the weekend). Big mistake. If you put off calling hospice, you’ll miss out on a lot of benefits. Hospice pays for things like physician services; nursing services; home health aides, medical equipment and supplies; spiritual, dietary and other counseling; continuous care during crisis periods and bereavement services. Many of those services would have to be paid out-of-pocket if not for hospice. And just because you go on hospice doesn’t mean you’ll die within six months. Many people receive hospice benefits for a few months and are later declared ineligible.