My father-in-law just turned 100, my sister’s mother-in-law is 93, my friend’s mother just passed away at 95. It is not unusual to hear of people in their 90s, sometimes even in their 100s, and, in, fact, it has been said that this is the fastest-growing portion of our population. But although many are privileged to attain old age, especially with the help of advances in medicine, often people are not completely well by that time. In fact, they may require help with many aspects of their daily lives. If someone needs ongoing assistance with the basic activities of daily living (eating, dressing, bathing, etc.) for an extended period of time, whether because of a mental or a physical impairment, what they receive is considered long-term care—which may include a broad range of supportive medical, personal, or social services.
This care can be provided in a variety of settings—in the home, in an assisted-living facility, at an adult day care center, or in a nursing home. Certainly, if the care can be given at home, many people rely on family members or friends to provide it. In fact, according to the Congressional Budget Office, the value of that care in 2011 was $234 billion.
But what if the care that is needed can’t be provided by family or friends, or needs to be administered in a nursing home? What if the responsibility of helping an elderly parent is too difficult with managing other family obligations, or incurs too much time lost at work, or would cost someone a promotion in his or her profession? Caring for an infirm individual is physically taxing—and emotionally stressful. In fact, studies have shown that caregivers (who tend overwhelmingly to be women) can suffer very serious health consequences. If the care has to be provided by others, how much does it cost, and who pays for it?
The cost today for informal, or custodial, care at home (help with eating, bathing, dressing, etc.) runs approximately $21/hour or $210/day for a live-in aide. These rates are agency rates; help gotten outside an agency can be less expensive, but there are drawbacks to going that route, such as no medical supervision of the aide, no screening, and no back-up for an aide who is ill. Costs in a kosher nursing home, should a facility be required, can be approximately $300– $450/day. There are assisted-living facilities that are less expensive, but they are generally not suitable for an elderly person who needs a lot of care due to illness or dementia. At these rates, one year of care can run between $76,000 and $164,000, depending on location.
Of course, you might ask, “Doesn’t Medicare pay for the care?” In fact, Medicare pays for less than 2% of overall long-term-care services, and only for people 65 and over. There is a very small amount of home care available, and only a stay at a skilled nursing home after a hospital confinement of at least three days is covered— for 20 days fully, partially for an additional 80 days—and only for rehabilitative care, not for custodial care. The overwhelming majority of the cost has to be covered by the individual. That’s a crushing burden to bear.
What about Medicaid? Since Medicaid is considered the safety net for people who have very few financial resources, in order to qualify for Medicaid in New Jersey, you have to spend down most of your assets, and you are very limited in the income you can keep. This is certainly a legitimate approach for someone whose only substantial asset may be a home, or for someone who simply has a small amount of savings. That person may be limited in his choice of nursing home, but the possibility of protecting against the expense of long-term care just is not feasible.
Sometimes, people who have considerable means to protect have used a strategy to access Medicaid benefits by transferring their assets out of their control, most often to their children. But legislation passed in 2006 made it more difficult to go this route, changing the look-back period for countable gifts from three to five years, as well as stiffening other requirements. Also, of course, such a plan cannot be made without the help of a competent elder-law attorney.
Many of us are good planners, especially for retirement. But often, when the topic is the possibility of needing long-term care, denial reigns. We feel it will only happen to others, but never to us. In fact, we protect ourselves against many events that have a much lower probability of happening than one long-term care event in our old age. We protect against fire or theft in our homes, against auto accidents, against big medical bills. But all of these happen much less frequently than someone older needing help to continue living comfortably and with dignity.
The oft-quoted statistic is that 40% of all people 65 and over will need some kind of long-term care services in their lifetime. Obviously, the older you are, the higher the probability. In fact, strokes or debilitating accidents or illness can happen to anyone at any age, and, statistics notwithstanding, if you need such care your family’s finances can be ravaged, and, if you are older, your retirement plan will be derailed. Long-term investments might have to be liquidated, and support for everyday living expenses for you and your family can be seriously undermined.
The good news is that forewarned is forearmed, and there are various insurance products available to protect against the risk of long-term care expenses; some will even pay for your care in Israel, should you decide to make aliyah. But don’t think if you’re in your 40s that this article is only for your parents. This is meant for you as well! If you want to keep your options open and affordable, it’s not too soon to be thinking about this subject.
Ann Stern is an independent insurance agent specializing in crafting policies based on each individual’s needs. She can be reached at [email protected].
By Ann Stern, CLTC
