Think for a minute about all the things you did when you woke up this morning. You probably got out of bed, walked to the bathroom, cleaned yourself up, brushed your teeth, got dressed, made yourself some breakfast, and headed out the door to go to work. These activities of daily living are so routine, you likely did them without even thinking about it.
Now imagine that you couldn’t do these things on your own. It could be because you’ve had an accident, you’re recovering from an operation, or you have an illness that limits your mobility. Whatever the reason, you now need help from another person to do many or even most of your basic daily activities — and you’ll continue to need it for weeks, months, or even years.
This kind of help is called long-term care, and there’s a good chance you or a close loved one will need it at some point in your life. According to the U.S. Department of Health and Human Services (HHS), a person who turned 65 today has almost a 70% chance of needing some form of long-term care in the future.
Needing long-term care isn’t just a physical burden; it’s a financial one too. According to the 2020 Cost of Care Survey by Genworth Financial, professional long-term care can cost anywhere from $1,603 to $8,821 per month. Most employer-sponsored health insurance plans don’t cover these costs, and even Medicare provides only limited coverage.
If you don’t want to risk being bankrupted by long-term care costs in the future, you need to do some planning now. Even if you don’t think you’ll need long-term care for many years to come — or at all — it’s better to think about it ahead of time than to take a chance on having to deal with both a health crisis and a financial crisis at once.
Options for Long-Term Care
When many people hear “long-term care,” they immediately picture a nursing home. However, it’s possible to receive long-term care in a variety of settings, which differ widely in terms of both comfort and cost.
The main forms of long-term care are:
1. In-Home Care From Relatives
Dealing with a long-term injury or illness can be a lot less stressful in your own home with familiar things and people around you. Thus, one common type of long-term care is to have a relative or friend tend to your needs at home.
While unpaid in-home care is easiest on the person receiving care, it can be difficult for the caregiver, both emotionally and financially. A 2018 Genworth study found that more than half of family caregivers had high levels of stress, and roughly one-third said their careers had suffered on account of their caregiving duties.
2. Home Health Aides
If you want to receive care at home without putting a burden on your relatives, you can hire someone to help you. A home health aide doesn’t provide medical care but can help with such daily tasks as bathing, dressing, and eating. The 2020 Genworth survey found that the median cost of a home health aide in 2020 was $24 per hour, or $4,756 per month.
3. Homemaker Services
Some people don’t need help with bathing or dressing, but they still need someone to handle daily chores they can’t manage on their own, such as cooking, cleaning, and running errands. For this, you can hire a homemaker service, which costs a bit less than a home health aide. Genworth put the median cost of homemaker services for 2020 at $23.50 per hour, or $4,481 per month.
4. Adult Day Care
Some older people can still get up and about, but they can’t be on their own for long periods of time. An adult day care program is a place where adults can go during the day and spend time with others, with a caregiver there to keep an eye on them. Adult day care programs can offer structured activities, meals, transportation, and sometimes health services. They’re cheaper than most long-term care options, at around $74 per day or $1,603 per month, according to Genworth.
5. Assisted Living
Home health aides can help with daily activities, but they can’t provide actual medical care. People who need regular medical supervision are better off moving to an assisted living facility. This is a place where people can live on their own in private apartments and have access to both personal care and medical care on site. The median cost for an assisted living facility was $4,300 per month in 2020, according to Genworth.
6. Nursing Home
Nursing homes provide the highest level of supervision and care. These all-inclusive facilities offer room and board, personal care, supervision, activities, medication, rehabilitation, and full-time nursing care. This level of care comes with a high price tag, however. Genworth found that in 2020, a semi-private room in a nursing home cost $7,756 per month, and a private room cost $8,821 per month.
Government Programs
Most Americans can’t afford to pay for professional long-term care out of their own pockets. A 2020 survey by The Ascent found that over half of Americans have less than $5,000 in savings. Roughly one-third have less than $1,000 — not enough to pay for even a single month of long-term care.
Government programs, including Medicare and Medicaid, can help you meet some of the costs. However, these programs offer only limited aid. Each one has specific rules about who qualifies for benefits, what services it covers, how long you can receive aid, and how much you must pay for on your own. If you need long-term care, it’s certainly a good idea to look at these programs first to see what they cover, but it’s a mistake to rely on them to pick up the whole tab.
Medicare
In most cases, Medicare does not include any long-term care benefits. However, there are several specific exceptions:
- Skilled Nursing Facility (SNF) Care. If you come out of the hospital after a stay of at least three days, Medicare provides partial coverage for up to 100 days’ worth of medically necessary care while you recover. To receive this coverage, you must enter a Medicare-certified SNF or nursing home within 30 days after you leave the hospital. Medicare covers all of your treatment there for the first 20 days of your stay. Beginning on day 21, you must pay a daily copayment, which is set at $185.50 in 2021. Medicare covers any cost beyond this copayment up through day 100. If you still need care after that, you’re on your own.
- Rehabilitation. If you have a condition that requires ongoing medical care to help you recover, Medicare provides partial coverage for a stay in an inpatient rehabilitation facility. It covers the cost of treatments such as physical therapy, meals, drugs, nursing services, and a semi-private room. However, you must pay an out-of-pocket cost for this care that depends on the length of your stay. For the first 60 days, you pay a $1,364 deductible. This cost is waived if you’ve already paid for a hospital stay for the same condition. For days 61 through 90, you pay $341 per day. After day 90, you start using up your “lifetime reserve days.” You have only 60 of these days over your lifetime, and each one costs you $682. If you still need care after your 60 days are used up, you must pay the full cost. Also, any extra costs during your stay — such as a private room, private duty nursing, or a phone or television in your room — are your own responsibility.
- Home Health Services. You can also use Medicare to pay for in-home care for a specific illness or injury. This includes part-time or intermittent skilled nursing care, physical or occupational therapy, and speech-language pathology. To qualify as part-time, your care must cover less than eight hours per day, or less than seven days per week, over a total of three weeks or less. If you are receiving this type of in-home care, Medicare also pays for additional, basic care from a home health aide. Medicare does not cover care from a home health aide if that’s the only care you need, and it does not cover homemaker services under any circumstances.
- Hospice Care. People who are terminally ill sometimes choose to spend their last days in hospice care. Hospice treatment focuses on relieving the patient’s pain, rather than trying to cure them. Medicare covers hospice care for patients who are terminally ill, are not seeking a cure, and do not expect to live more than six months. Patients can receive this kind of care in their own homes, a hospital, or another inpatient care facility.
For more details about what Medicare covers, see the Medicare website.
Medicaid
Unlike Medicare, Medicaid covers all types of long-term care. This includes both in-home care — such as a visiting nurse or a home health aide — and care in facilities such as nursing homes. You can get home health aide services from Medicaid even if you don’t need skilled care as well, and you can get care in a facility even if you aren’t recovering from a hospital visit.
However, Medicaid has strict limits on eligibility. You can’t receive Medicaid benefits if your income is above a certain level, which varies from state to state. Also, in some states, you cannot qualify unless you have dependent children. You can find the limits for your state through your state’s Medicaid website.
Veterans’ Benefits
The Department of Veterans Affairs (VA) covers the full cost of long-term care for veterans who have disabilities resulting from their military service. It also covers costs for veterans who can’t afford to pay for their own care. Other veterans receive some coverage, but they must pay a copayment. According to the VA site, the current copayments for long-term care are:
- $97 per day for inpatient care, such as nursing home care
- $15 per day for outpatient care, such as home health care or adult day care
- $5 per day for domiciliary care in a special facility for homeless veterans
The VA site has more information about the health benefits available to veterans and how to qualify for them.
OAA Programs
Some states have their own separate programs to help provide care for adults over age 60. These programs get funding from the federal government under the OIder Americans Act (OAA). The OAA supports a wide network of state, local, and tribal agencies called the Aging Network. It works with tens of thousands of service providers and volunteers to deliver various types of care, including:
- Meal delivery
- Transportation
- Home health services
- Home health aide and homemaker services
- Adult day care
- “Respite care,” which gives family caregivers some time off from taking care of an older relative
- Help using other government benefits
You can find programs in your area through Eldercare.gov.
Products to Help You Pay for Long-Term Care
Government programs don’t cover everybody, and the coverage they offer isn’t always enough to pay for the full cost of long-term care. To make up the difference, some people carry long-term care insurance, which provides coverage for this specific type of care. Others rely on other financial products designed for senior citizens, such as annuities and reverse mortgages, to cover their costs.
Long-Term Care Insurance
Long-term care insurance, or LTC insurance, works like other types of insurance. You pay a premium each month to the insurer, and if you ever need long-term care, it covers the cost. However, one big difference between this and most other types of insurance is that you have to qualify to buy a policy. If you’re already in poor health, there’s a chance you won’t be able to get a policy — and if you do, you’ll have to pay a steep price for it.
There are several ways to buy a long-term care insurance policy. The most common sources for policies are:
- Insurance Specialists. You can buy LTC insurance through financial professionals such as insurance agents, brokers, and financial planners. To find insurance companies that offer LTC insurance, visit your state insurance department or do an Internet search for “long-term care insurance” plus the name of your state.
- Employers. Although standard employer-sponsored health care plans don’t cover long-term care, many employers — including the federal government, many state governments, and some private companies — offer LTC insurance as an add-on that employees can purchase separately. To find out whether your employer offers this coverage, check with your pensions or benefits office.
- Organizations. Some labor unions and other professional or trade organizations, such as the National Education Association, offer LTC insurance as a benefit to their workers. Membership organizations such as alumni associations or service clubs like the Lions and Elks can also take part in group plans.
- State Partnerships. In some states, you can purchase LTC coverage through a State Partnership Program. These programs provide benefits partly through private long-term care insurers and partly through Medicaid. You can learn more details about these programs from the Department of Health and Human Services (HHS).
Although long-term care coverage can protect you from devastating long-term care costs, most Americans don’t carry it because of its high cost. According to the American Association for Long-Term Care Insurance (AALTCI), the typical annual premium for an LTC policy ranges from $1,400 to $3,100. This annual cost varies based on factors such as age, health, gender, location, and amount of coverage.
Financial planner David Demming, speaking with Policygenius, says LTC insurance is most likely to be a good deal for people aged 50 to 55 with a net worth between $1 million and $3 million. That’s enough money to afford the premiums, but not enough to cover the full cost of long-term care. To get a clearer idea of what LTC policy pricing could be for you, check out online calculators like this one from Genworth.
Annuities
Some people choose to fund their long-term care through an annuity, a financial product that pays out a fixed sum every year over a specific period. There are three kinds of annuities you can use for this purpose:
- Immediate Annuities. With an immediate annuity, you pay a one-time premium, and in exchange the company pays you a fixed monthly benefit. This benefit can last for a specific period of time or the rest of your life. One advantage of an immediate annuity is that anyone can buy one, regardless of health status. This makes it a good option for people who no longer qualify for LTC insurance due to poor health. However, the fixed monthly sum you get might not be enough to meet your long-term care costs, and inflation can eat into its value.
- Deferred Annuities. You can buy a deferred annuity with either a one-time payment, like an immediate annuity, or a series of regular payments. The money you pay into the annuity earns interest and grows tax-free. It doesn’t start paying out a monthly benefit until a specific date, such as your 65th birthday.
- Long-Term Care Annuities. A long-term care annuity is a deferred annuity with a long-term care rider. This type of annuity doesn’t pay out until you need the money for long-term care costs. To collect the monthly payment, you must be diagnosed with a medical condition that requires long-term care, such as Alzheimer’s disease. According to HHS, this type of annuity is usually available only to people age 85 or younger who meet certain health requirements. However, according to SmartAsset, it’s sometimes easier to get approved for a long-term care annuity than for LTC insurance.
Depending on your situation, an annuity can be a cheaper way to cover long-term care costs than LTC insurance. However, it typically requires a large up-front payment, which is even higher if you already have health issues. Also, annuities can have a complicated effect on your taxes — HHS recommends consulting a tax professional before you buy one.
Reverse Mortgages
Another way to pay for long-term care services is with a reverse mortgage through LendingTree. This is a special type of home equity loan available only to homeowners age 62 and up, which allows you to get cash out of your home without giving up your title to it.
The house remains your property until you die. At that time, it goes to the bank unless your heirs choose to pay off the amount you’ve borrowed and keep the house. Otherwise, the bank sells the house and keeps the amount you owed at the time of your death. Any cash beyond that balance goes to your heirs.
There are several ways to get cash from a reverse mortgage. You can get one large lump-sum payment, a regular monthly payment, or a line of credit you can draw on as needed. The second two options are most useful for paying long-term care expenses. As long as you spend the payments in the same month you receive them, the money is not taxable income and doesn’t affect any government benefits, such as Social Security, Medicare, or Medicaid.
Long-Term Care Planning
Dealing with long-term care can be an emotional and financial burden, both for you and for your family. The best way to lighten that load is to plan ahead. By making your plans early, you’ll have plenty of time to do research, make decisions, and buy traditional long-term care insurance or any other products you need to cover the costs.
1. Research Your Options
Start by looking into the options for advanced care in your area. Check the phone book or do an online search to find out what choices you’re likely to have for assisted living and nursing homes, as well as home health aide and homemaking services. The Genworth Cost of Care Survey tool can help you estimate what these services cost now and what they’re likely to cost in the future. You can also check the costs for services in other areas to figure out whether relocating would save you money.
2. Talk to Your Family
Once you have some idea of available options, talk to your family members and get their input. Set aside a time when you can talk everything over in person without having to rush. Here are some points to discuss:
- Your Lifestyle. Discuss the way you live now and how you expect to live in the future. For instance, if it’s important to you to stay at home and live independently, let your family know that. Tell them about your priorities, and find out what’s important to them, as well.
- Your Care Options. Show your family the research you’ve done on care options in your area. Tell them how you’d prefer to receive care and whether you have a specific provider in mind. Also, find out how much of your care your loved ones are able and willing to take on themselves. If you have several relatives who could help you, talk about which specific responsibilities each of them could handle.
- Your Finances. Once you’ve considered what kind of care you want, talk about what it’s likely to cost. Let your family know how much money you can set aside now toward your future care needs, and find out if any of them are willing to contribute.
- Medical Care. Make sure your family knows your health history in detail so they can supply it to a doctor if they need to. Also, make sure they know how to contact all of your current medical providers.
- Legal Issues. Decide who should be responsible for making medical decisions for you if you can’t make them yourself. Use this information to set up a durable power of attorney for the future. Also, talk to your loved ones about your wishes for end-of-life care. If you already have a living will, tell them what it says and where to find it; if you don’t have one, make plans to set one up.
3. Calculate the Cost
Now that you have some idea who will provide care for you when you need it, the next step is to figure out how much it will cost. Even if your family has offered to provide unpaid care for you when you need it, there could still be some cost involved. For instance, you could choose to hire a house cleaning service so your loved ones won’t be responsible for all the housekeeping chores in addition to your care.
If you’re planning to pay for professional long-term care services, think about how long you’re likely to need them. According to the HHS, people who require long-term care use it for an average of three years. This includes an average of two years of in-home care and one year in a long-term care facility. About one in five people need care for more than five years.
To figure out the total amount you’ll need for long-term care costs, multiply the cost by the expected length of care. For instance, suppose a home health aide costs $60,000 per year and assisted living costs $90,000 per year. If you expect to need two years of home health care and one year in assisted living, you must save up a total of $250,000.
If the total cost looks like more than you can possibly afford, look for ways to save on long-term care. This could include relying on family care, negotiating prices, getting help from government programs, or relocating to a cheaper area.
4. Make a Plan to Cover the Costs
Once you have an idea of how much money you’ll need for long-term care, you can start figuring out how to pay for it. If your income and assets are low enough, you can look to Medicaid for help when you need care. State government programs could also provide some help.
By contrast, if you have a lot of liquid assets — that is, cash, retirement savings, and other assets you can easily convert to cash — you might be able to pay for your care out of pocket. Financial planners interviewed by Policygenius say this is most practical for people with a net worth of at least $3 million.
If you’re somewhere in between those two extremes, you’ll need some other way to meet the costs of long-term care. That could mean buying long-term care insurance, investing in an annuity, or taking out a reverse mortgage. A financial planner can help you compare these options and decide which one is best for you.
5. Put Your Plan in Writing
After you’ve come up with a plan to meet your long-term care needs, the final step is to put it in writing. Having a written plan gives your family something to consult if there’s ever any confusion or uncertainty about your wishes.
If you’ve decided to make a living will or set up a durable power of attorney, these documents should be part of your written care plan. Consult a lawyer to help you set these up. Give a copy of the entire plan, including the legal documents, to any relatives it could affect.
Putting your plan in writing doesn’t mean it’s set in stone. If your health or financial situation changes in the future, your long-term plans might need to change too. Update your plan as needed, and make sure your relatives always have the latest version.
Final Word
If you’re young and healthy, you may feel like it’s too soon to start thinking about long-term care. Since you probably won’t need it for many years, you figure you can just wait and deal with it when the time comes.
However, there are several good reasons why now is exactly the right time to think about it. First of all, the future is unpredictable. Even young people can suffer injuries or develop illnesses that keep them off their feet for months.
Also, LTC insurance gets more expensive and harder to obtain as you age. If you decide to wait until you’re 65 before buying a policy, it could already be too late to qualify. And even if you can get one, you’ll pay a much steeper rate for it than you would if you’d bought it 10 years earlier. So it makes sense to start thinking about this type of insurance and decide whether it’s for you before you hit age 55.
Finally, if you put off thinking about long-term care until you actually need it, you’ll have to make a whole lot of important decisions in a hurry. You could end up making choices that aren’t best for you because you don’t have time to weigh the options. By avoiding procrastination and thinking it through now, you can ensure that when — or if — you finally need long-term care, it will be as easy as possible for you and your family.
