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Long Term Care Planning Basics

What is the right option for you?

By Joel Ferris

What is Long Term Care?
Long term care (LTC) is the assistance or supervision you may need when you are unable to do some of the basic activities of daily living (ADLs) – bathing, dressing, eating, continence, toileting and transferring. You also may need help because of a severe cognitive impairment that can be caused by Alzheimer’s disease or other brain disorders.

A need for long term care may result from accidents, illness, advanced aging, strokes, and other chronic conditions.

Long term care can be received at home, in an assisted living or nursing facility. You may qualify for long term care insurance if you can’t perform two ADLs by yourself for at least 90 days or require substantial supervision if you suffer from a severe cognitive impairment.

We are all living longer. Now what?
As more and more of us are living into our 80s, 90s and even100 the question must be asked, “How am I going to pay for expensive long term care if I need it?”

How much does long term care cost?
First, let’s look at the actual cost of care in Spokane if you needed it now and had to pay out of pocket.*

  • $71,294 per year for In-Home Care with Home Health Aid
  • $61,008 per year for Assisted Living
  • $127.385 per year for Nursing Home Care, semi-private room
  • $131,400 per year for Nursing Home, private room.

*2020 Genworth Cost of Care Survey from Joel

The above costs are average costs for one year. The average length of a long-term care event nationally is 2.9 years and much longer if there is a cognitive impairment.

If you dive into the statistics, you will find that 44% of men who reach the age of 65 in good health will need some form of long term care in their lives, and 72% of women who reach the age of 65 and are in good health will need some form of long term care in their lives**

**American Association of Long Term Care Insurance LTC Sourcebook

YOU HAVE FOUR OPTIONS:

  1. Family. This was the typical default prior to the era of two income households. If you think your adult children will care for you it is important talk this through with them in advance and not just assume. This type of commitment could involve a child leaving a job or severely scaling back to help with your care. Both parent and child need to be realistic. Remember that as soon as a child starts taking care of a parent the relationship changes to that of caregiver and patient which is a whole different dynamic.
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  3. Government Programs. Medicare is not a long-term care option. It is only short term care. If you qualify. Medicaid is the government form of long erm care and does require a spend down of your assets before you can qualify and there is a 5-year look back so you cannot gift your adult children the bulk of your estate and immediately access Medicaid benefits.
    With this option you may have to ask, if you are married, what quality of life will my spouse be left with after the estate spend down?
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  5. Pay Out-Of-Pocket. If family is not an option and you don’t qualify of a government program and haven’t transferred the risk to an insurance provider, then you will be paying for long term care out-of-pocket. You have to ask yourself, “How long could I pay for care if I had to pay for it myself?” (in the range of $4,000 to $8,000+ a month in current dollars). “What would I liquidate first to pay for care?”
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  7. Long Term Care Insurance. This type of insurance will allow you to transfer the risk of the high cost of long-term care away from your estate assets to an insurance provider. Long term care insurance isn’t just a commodity like term insurance or auto insurance. It is much more nuanced, and you would be wise to work with a long term care insurance professional (a person who specializes in this type of insurance) to make sure you fully understand how policy benefits work and if it is the right solution for you. A long term care insurance professional will design a policy that is both suitable and affordable based of your specific age, health, local cost of care, and unique family situation (individual or shared policy). Long term-care insurance does get more expensive and harder to qualify for as we get older. Keep in mind that the average age that people buy long term care insurance is 57 nationally, so it is a good idea to put it on your retirement planning list by your early to mid-fifties when your health is good and premiums affordable.

WORDS TO THE WISE
Do your homework and plan in advance. Having a long term-care plan in place is as important as having a will and medical directive. By pre-planning you control your options and don’t leave your care to chance. Talk with your family. If you had a parent who received long term care, that memory often makes the discussion easier, but remember when adult children say, “Don’t worry, I will take care of you,” you need to ask yourself how realistic it would be for them to disrupt their lives to provide your care. Ultimately, you need to select the long term-care option that is right for you. If you can’t qualify for traditional long term care insurance you may qualify for supplemental insurance like critical care insurance or short-term home health care insurance or perhaps an hours-of-homecare membership plan. Depending on your situation you may find that so-called “combo” or “linked-benefit” insurance products may be right for you that combine life insurance or an annuity with a long term care insurance rider.

Other professional you may want to consult with include an elder law attorney, a CPA and a financial planner (most require that their clients at least be aware of the potential cost of long term-care and the effects it can have on their estates). Other helpful resources are SHIBA’s Long Term Care Workbook and their Consumer Guide to Long Term Care Insurance which you can get on a PDF format at www.insurance.wa.gov or by calling 1-800-562-6900 and they will mail it to you. Allow though the above information is Washington State specific other states will have comparable resource options.