Planning and Paying for Long Term Care
By Joshua Brein
As a Financial Advisor, I run into many different kinds of people with many different kinds of needs financially. One thing that I have consistently seen is that most people don’t seem to understand exactly just how much it costs to pay for care as they get older, or which type of care is actually covered by their health insurance or by Medicare and which is not.
Medicare insurance and all it provides is a great help to people, but it will only get you so far. For example, if you suffer a fall and break a bone (ankle, hip), it may be nearly impossible for you to do the things that you were able to do before you had this accident like getting dressed, bathing, using the bathroom, getting in and out of bed, managing your medication, eating or preparing meals without assistance and providing yourself transportation to places you may need to go. We call these the “Activities of Daily Living” or ADL’s for short. Fortunately, if this is the case, Medicare will often pay for a facility which you can temporarily live at (Skilled Rehab) or service that may come to your home and provide help with your ADL’s but only on an intermittent basis as prescribed by a physician for an acute injury or condition that can be healed. So to summarize, Medicare will provide care for ADL’s only if they’re sure you won’t need it for very long.
As we get older, whether by injury, illness or just plain old time, we often lose the ability to perform ADL’s on our own. If there is not an acute cause for our lack of ability to perform these ADL’s that can easily be corrected by medical treatment and short term Skilled Rehab, then Medicare doesn’t help cover the costs of this care at all. This is what’s known as Long Term Care or LTC for short. LTC is a broad term that covers many types of care including Home Care, Assisted Living Care, Memory Care and Skilled Nursing Care. The only way to pay for these costs is either out of your own pocket or with LTC Insurance products.
Most people have no idea how much LTC costs or how long they will need it, so they do little (if anything to prepare for the potential costs). This is a mistake that can leave even the wealthy impoverished and have even more devastating effects on those who don’t have a large amount of cash to cover the costs.
A recent study by the American Society on Aging says “After age 65, an American has more than a 70 percent chance of needing help with the activities of daily living like dressing, bathing, and using the bathroom.” So in all likelihood, if you live past age 65, you stand a very good chance of paying for this care.
So how much does LTC really cost?
Washington State has some of the highest costs of care for LTC in the entire country. The Genworth 2013 Cost of Care study states that the national average cost of Assisted Living care is $41,000 per year, the cost of that care in Washington averages $51,000 per year about 25% higher than the national average. Skilled Nursing averages out at $73,000 for a semi private room nationally, but here in Washington the average cost is $88,633 for a semi-private room which is about 17% higher than the national average.
Paying for Care in Seattle
The costs of care are actually higher here in the Seattle area than most other parts of the state according to the Genworth 2013 Cost of Care Study. Assisted Living averages $54,000 per year and Skilled Nursing averages out to $93,805 for a semi-private room annually.
It’s important to plan ahead for the potential costs of this care. Here’s an example of the potential costs you could be looking at for just three years of Assisted Living. Let’s say a husband and wife both need Assisted Living Care here in Seattle and have to both pay the average cost for that three year period, the total cost would be roughly $324,000.
A stay for a family of two in Skilled Nursing facility here in the Seattle for three years would total $562,830.
So how do we prepare for these potential costs which are growing yearly and definitely not getting any less expensive? Awareness is key, first people have to accept that there is a strong likelihood that they will have to pay for the care and this type of care will more than likely exceed what family members are physically or financially prepared to provide; most people do not dispute that. Secondly, I always urge my clients to decide up front the type of place they would like to receive their care at. For example, would you like to stay in the comfort of your own home or maybe enjoy the social and cultural benefits of living at a community with other people in a similar situation when it comes time to receive your care? This can really help in estimating the costs that one may be subject to based on their needs and desires and can make the planning process much easier. It’s important that you find someone who can help you do the math and see how the numbers fit into your individual financial equation.
Lastly, the best defense is a good offense. Many people think that traditional LTC insurance policies (which can be costly and need to be qualified for medically) are the only way to protect themselves against financial ruin, this is not the case. There are several alternatives that make much more sense for people who have concerns with eligibility and liquidity of their money. There are solutions out there for most people, don’t get discouraged and don’t be afraid to seek out professional advice regardless of your age or financial situation.
About the Author:
Joshua Brein is the President of Brein Wealth Management, an independently owned and operated Registered Investment Advisory Firm serving Seattle, Washington and the surrounding communities.
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