We have all seen the headlines about people who have contracted COVID-19 and had to be hospitalized or quarantined. Today, I read a story of a woman who has been battling the virus for 100 days. Those of you who have helped a family member or friend with their illness have first-hand knowledge of the high cost of caring for someone. The costs include the direct costs of care, out-of-packet money for support related items, time-off from work and illness’s emotional drain are very high for all involved. The pandemic should illustrate to all of us the costs of an unplanned and unwanted illness.
Now just think of yourself, your parents or other family members going through another illness in old age. I have written that the availability and cost of long-term care are a coming national crisis. I am more convinced than ever that this is the case. America has not financially planned for this expense. The wave of elderly needing money to pay for the costs of physical illnesses and memory care not covered by public and private insurance programs is only starting to build.
In my book, A Common Sense Approach for Your Money, I highlight this looming problem. Here is what I wrote updated for the latest reported costs.
Genworth Insurance, one of the nation’s leading private long-term care insurers, predicts 7 out of 10 people over age sixty-five will incur long-term-care-related costs in their lifetimes. Long-term care costs can be significant. For the last fifteen years, Genworth has developed the Cost of Care Survey to help families understand the costs of varying types of care across the US. Since 2004, this survey has become the foundation for long-term-care planning for many individuals.
Here are the estimated annual median costs for a number of long-term-care-related expenses taken from the 2019 Genworth Cost of Care Survey:
Annual National Median Costs 2019
Private Room in a Nursing Home (based on 365 days of care): $102,200
Semi-Private Room in a Nursing Home (based on 365 days of care): $90,155
Home Health Aide (based on forty-four hours per week): $52,624
Homemaker Services (based on forty-four hours per week): $51,480
Assisted Living Facility (based on twelve months of care, private, one bedroom): $48,612
Adult Day Health Care (based on five days per week): $19,500
As you can see, the costs of long-term-care services can be staggering. With an ever-aging population and with more and more people needing cognitive or memory care, the reality of this cost is sobering. The most startling disclosure, however, is given these substantial costs, most people believe the costs are covered by Medicare, which they are not. Medicare only covers a limited number of days of care, as such, the bottom line is the benefit offered is not sufficient to pay the costs.
Once individuals determine there are little, if any, Medicare benefits, they are confronted with the reality of finding a way to pay for long-term-care. They then seek out state-regulated Medicaid coverage for their needs. When they do, they then get a second unwelcomed surprise. To qualify for Medicaid coverage, they will have to exhaust or spent down almost all of their savings, including home equity to qualify for coverage. The surprises don’t end there. Next, if the person does financially qualify for Medicaid, the state determines the standard of care, approves which long-term care facility the patient is admitted, and dictates the style of accommodation (shared room versus private room) for the patient. The patient loses control of their care in exchange for state involvement.
The major lesson here is that you need to set aside cash for the costs of long-term care or purchase some amount of private long-term-care insurance coverage when planning for your later years. This is becoming more and more evident to aging Americans.
Private long-term-care insurance coverage comes in various amounts with significant restrictions on coverage. In the last few years, the life insurance industry has developed many new long-term care protection products along with new alternative long-term-care products that have a wide variety of coverage and cost options. You need to see a qualified life insurance agent with a specialty in long-term-care insurance to get the right coverage.
Summary
Overall, it is critical for most people to get some amount of protection against the risk of a long-term-care event. If not, they are placing their family and others in the position of having to care for them, if needed, or placing their care in the hands of their state’s Medicaid program.
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