Elder Law Update

Last week, I discussed using Long-Term Care Insurance to cover the costs of assisted living or nursing home care.  This week, I’d like to back up a bit by discussing the different levels of care (what is the difference between assisted living and nursing home care, anyways?).  Next, I’ll get into other means of paying for long-term care, beyond insurance (Medicare? Nope. Medicaid? Maybe!)

First, long-term care is the kind of care provided to people who need help with basic activities (“activities of daily living”) such as bathing, dressing, eating, walking, etc.  Individuals may need assistance for physical or cognitive reasons, such as dementia.

The following are different types of long-term care:

– In-Home Care (by family caregiver or hired caregiver)

– Adult Day Care (non-residential facility for the supervised care of older adults, providing activities such as meals and socialization one or more days a week during specified daytime hours)

– Assisted Living Facility (housing for people with disability – often seniors – which provides assistance with activities of daily living but is not licensed to provide medical or continuous nursing care. Some provide special care for those with memory issues, while others are not equipped for residents with memory issues)

– Personal Care Home (Georgia term for a type of Assisted Living Facility generally housed in a smaller, home-like setting)

– Nursing Home aka Skilled Nursing Facility (facility providing long-term personal and medical/nursing care to the aged and disabled).

The appropriate type of long-term care is, of course, different for each individual.  Those who need nursing care are not eligible to stay in an Assisted Living Facility because the facility is not licensed to provide it.  On the other hand, those who don’t need nursing care tend to enjoy the residential, less medical setting of an Assisted Living Facility.  In-home care may be proper for a variety of needs, and can range from several hours per day or week to round-the-clock care.

So how much does this all cost?  Here are estimates based on a 2012 MetLife Market Survey which seem to accurately reflect the experiences of my clients:

In-Home Care: $17 – $24 / hour ($408 – $576 / day)

Adult Day Care: $40 – $140 / day (average $71)

Assisted Living Facility: $2,800 – $5,500 / month (average $3,350; up to $4,807 for memory care)

Personal Care Home: $1,500 – $4,000 / month (average $3,116)

Nursing Home: $5,400 – $10,000 / month (average $7,500).

As you can see, the costs of long-term care can be outstanding and are expected to grow.  Next week I will discuss how, in addition to planning ahead with savings or long-term care insurance, government benefits may be able to help.

Image © aey – Fotolia.com

Even though I practice “elder law”, not all of my clients are elderly… yet.  In counseling younger clients, I am often asked about long-term care insurance (LTCI) and its benefits and down sides.  While some consider the cost of LTCI premiums high, the cost of care is astronomical in comparison, making LTCI a hot topic.

When I began my career, I had the same questions as my clients.  Who should buy LTCI?  Is there an amount of wealth at which we can deem LTCI totally unnecessary or at least superfluous? If so, is that at $2 million? $10 million? I have been asking every insurance advisor I meet ever since.

My favorite answer so far – in terms of how wealthy one must be to make LTCI a ‘bad’ purchase – was that it depends on the client. (Let’s be honest – I’m a lawyer. I always think that “it depends” is the best answer!).

Here was the example: an individual with $2 million in assets may be able to generate enough investment income, along with his Social Security Retirement Benefits and pension/IRA/401K distributions, to pay the $3,500+ per month that Assisted Living or Nursing Care might cost without ever having to touch principal.  Of course, an individual with $10 million could do the same.  But as one advisor pointed out, the guy with $10 million could also buy a new home if his burned to the ground, but he still has homeowners insurance. And Warren Buffet apparently has long-term care insurance.  This is presumably because Mr. Buffet, along with the wealthy homeowner,  made an economic decision that he would rather pay insurance premiums now (risking he’ll never need to use the benefit) than risk having to pay the cost of a disaster (whether that be a home burnt down, or years of nursing home care at $80,000+ per year).

For some, LTCI may be necessary to preserve their estate. For others, estate preservation may not be important.  In addition, government programs such as Medicaid and Veterans Administration benefits are available as back ups for those that need financial assistance for long-term care and have [mostly] run out of funds.

For the wealthier folks, the decision whether or not to buy LTCI is more about risk management, taking into account variables such as the risk of long-term care and the cost if one actually needs it, versus the cost of LTCI premiums.  Of course, this is how Warren must have thought of it.

As for me? Although I definitely could not fund my potential long term care costs with any $10 million estate, I am probably not eligible for LTCI because I have insulin dependent diabetes.  Which brings up another important point – if you ARE in the market and are healthy, it may be a good idea to start shopping while premiums are lower and before potential health issues arise.

If you need any more guidance on this topic, feel free to contact me as I would be happy to point you in the right direction!

Image © gunnar3000 – Fotolia.com