There are two major problems in housing today, both relate to cost. The first is that the cost of housing, especially in areas restricted to single-family residences, is rapidly rising. The second is that the skyrocketing costs of nursing home care for the elderly means that more seniors are “aging in place” - the elderly remain in their largely single-family residences far longer than they did in the past. These problems seem to be irreconcilable since aging in place means even less available housing available, but that is deceptive. In fact, it may be that the solution is not to address one or the other, but take advantage of “the cure” for one to solve the other.
In a recent interview with National Real Estate Investor, Assistant Professor Sean Huang of Georgetown’s Department of Health Systems Administration, the author of a recent study on nursing home costs, noted that the rising cost of nursing homes have vastly outstripped the rate of inflation in states like New York (20%), Florida (29%) Vermont (29%), and California (30%). Since much of the long-term care costs are covered by the government, through Medicaid, Dr. Huang expects that the government will try to control those costs by having elders stay in their homes, where the costs of service is lower than in a nursing home. In most cases, these homes are single-family residences, located in areas with restrictive zoning.
Meanwhile, the Urban Institute found, in 2015, that there was a 460,000-unit supply gap between the demand for housing and the supply. Despite the rebound since the housing market crash in 2008, single-family permits are 47% lower than they were pre-crash. The vacancy rates are the lowest in decades and the rent rates the highest. At least four solutions to this housing crisis have been proposed:
- invest in old, unused buildings, including factories, government buildings, and warehouses
- normalize tiny living solutions, especially in urban centers
- create tax incentives for employers to help out with housing
- remove restrictions on the development of duplex housing in single-family residential areas.
The removal of restrictions has already gone forward in cities like Minneapolis, MN and are championed by several of the 2020 Democratic Presidential Candidates. The new rules allow an owner of a single-family residence to add or convert space to the home to create an “in-law” apartment, thereby doubling the housing units without having to have families living on top of each other.
So, how does this help the aging in place of our elderly? Simply by having the elderly renovate the space in their home to accommodate their restricted mobility, and then having a younger family move into the remaining space with the arrangement that the family earns equity in the property by providing support to the elderly individuals.
There are many unanswered questions in such an arrangement, such as how the services are supervised, whether training is provided, what safeguards there are to avoid abuse, and so on. Also, it is uncertain where costs and the supply of housing will go with the recent proposals for Medicarefor All and rent control of apartments. That said, this could be, on a case by case basis, an elegant solution to these two thorny problems.
The discussion of longevity and the increasing need for long-term care services has increased recently as we head into a Presidential campaign cycle. Many candidates are proposing some version of “Medicarefor All” for healthcare, and some include long-term care.
Some experts understand that any additional government solution will generally be means-tested. At the moment, there are several government programs for long-term care. These include:
This is the medical welfare program that will pay for long-term care but only if you have little or no assets. Medicaid is already the primary payer of long-term care in the United States. Generally, this is limited to care in a nursing home although some states are providing benefits for care in the community. Medicaid is usually never the goal or the solution for most people since it requires an individual to exhaust savings.
Medicare(including supplements) will not pay for long-term care, however, they will pay for up to 100 days of skilled services.
There are some VA benefits if you have a service-related need or have limited savings and income. Other veterans can receive VA nursing home benefits on a pay basis, although discounted, but only if a bed is available. Co-pays apply depending on the veteran’s income level.
Long-Term Care Partnership Program
This might be one of the biggest secrets in retirement planning. 45 states participate at the moment. If you own a Partnership Long-Term Care Insurance policy you also get dollar-for-dollar asset protection, or what a state bureaucrat would refer to as “asset disregard”. In the event you exhaust all your benefits from these special policies you can shelter part of your estate based on the total amount of benefits paid out and still access the Medicaid benefit without being poor.
There are several tax advantages available with Long-Term Care Insurance as well. This has been a plan that has enjoyed bipartisan support for some time.
One state has its own plan. While Massachusetts doesn’t participate in the federal long-term care partnership program; they do offer special benefits if you own a qualified Long-Term Care Insurance policy.
If you own a qualified policy you can be exempt from some MassHealth eligibility and recovery rules. These rules determine whether your home will need to be sold in order for you to become eligible for MassHealth benefits, and/or whether you or your estate may need to repay MassHealth for any of the long-term care expenses it paid on your behalf.
This gives you the ability to protect your home no matter what happens.
The Bottom Line
While many Americans will favor some plan to help those who have limited or no resources, a massive federal long-term care plan is unlikely to happen according to most experts.
Since the idea of a federal, state, consumer partnership was developed in the 80s and 90s, every administration since President Clinton has supported the idea of encouraging private Long-Term Care Insurance. However, few people are aware of the partnership program and other affordable options.
If you have savings to protect and family you care about you want to have access to your choice of quality care in the setting you desire, without placing a burden on family members or draining savings and adversely impacting income and lifestyle.
Caregiving is hard and creates tremendous pressure and stress on loved ones. They have their own careers, families, and responsibilities. Paid care is expensive and without some advance plan can drain even a large estate.
Affordable Long-Term Care Insurance gives you the ability to safeguard assets and give your family the time to be family.
If you have savings in excess of $100,000 you should investigate before you retire. Most people purchase policies in their 50s.
There are several types of plans including the traditional, partnership certified plans, hybrid – or asset-based plans which include death benefits, and limited duration or short-term plans.
Since so many people will need long-term care services due to illness, accident, or the impact of aging, American families need to have some plan for long-term care. The United States Department of Health and Human Services indicates that if a person reaches the age of 65, they have a seven in ten chance of needing some type of long-term care service in their lifetime. Not all of those will go “long” but the risk is high and planning is essential.
The key is to plan before you retire when premiums are very affordable. Start your research by finding the current cost of care in your state by using the LTC News Map by clicking here.
Always use an experienced Long-Term Care Insurance specialist. Find one by clicking here. Act before you retire and give your family peace-of-mind.