Long-Term Care (Summary)
What is Long Term Care?
Long-term care (LTC) refers to assistance with daily living activities – including bathing, eating, and dressing – for a prolonged period of time (usually over 90 days). LTC can range from support with Instrumental Activities of Daily Living (IADLs), such as taking medication and shopping, to 24-hour nursing home care.
Three Types of LTC
Nursing Home Care is medically necessary and usually requires a residential stay. It is important to understand that Medicare covers required services such as physical therapy or post-surgery nursing, but it does not pay for custodial care, which provides help with the daily activities mentioned above. (Medicare Part A may cover some costs in a sanctioned rehabilitation facility under strict parameters and time constraints[MD1].)
Assisted Livingmay or may not require inpatient treatment, but some care is necessary, such as redressing bandages. According to the National Caregivers Library, nearly 1.2 million individuals live in the nearly 30,000 state-regulated assisted-living facilities across the U.S. That number is expected to rise significantly as millions of Boomers will require assisted living care over the next 25 years. While private insurance may cover some of the cost, Medicare does not.
Home Health Care[MD2] provides several medical-related services that can be administered in the home, such as injections, nutrition therapy, and wound care. Eligible patients must be under a doctor’s supervision and require intermittent skilled nursing care, physical therapy, speech-language pathology services, or occupational therapy. The motivation behind giving care at home is lower costs, patient comfort, and independence.
Access and Cost
According to the U.S. Department of Health and Human Services, 70% of individuals over 65 will need long-term care, and by 2050,327 million will require some level of paid LTC. This estimate is influenced by growth in the population of older people in need of care. Unfortunately, there are simply not enough beds to accommodate all of the potential patients, and many may be unable to gain access to proper facilities.
Aside from availability is cost. Here are 2017 monthly rates for differentiated levels of LTC (based on national average).4
Home Health Aide / Assisted Living Facility / Nursing Home Care$3,707 / $5,974 / $6,284[MD3]
While planning for the final two years of life may seem excessive to some, there is growing concern that for many aging Americans, a lifetime of savings may eventually be used to pay for a long-term care facility, rather than be passed down to family members.
Many people mistakenly believe that Medicaid will cover long-term care, but this only occurs after all assets have been exhausted and an individual qualifies based on annual income. Americans who own a home or have some reserves may have to liquidate assets to pay for decent accommodations. This leaves a minimal inheritance for surviving relatives, and the very real possibility that earnings garnered over a lifetime of labor may eventually end up in a nursing home[MD4].
Solutions are available – and not necessarily expensive – for those who plan ahead. Long-term-care insurance is certainly an option, as are annuities and life insurance policies with riders attached. Ultimately, understandingthe complexities of health and long-term care is the first and most important step in helping your clients achieve retirement security.
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4 Data Provided by HealthView Services
[MD1]Despite the likelihood that millions of Boomers may need future care, the number of skilled nursing homes in the United States has flatlined at about 15,000 for more than a decade. By 2021, that figure couldshrinkby 20 percent.1
[MD2]Trends are pointing to an increase in assisted living and home health care.
[MD3]As you can see, care is already expensive, and will only increase as health care inflation rises.
[MD4]Nursing homes can drain assets, including property. There is a five-year window in which nursing homes can be paid for care even if assets have been transferred to a child or other family member.