It can be hard to imagine ourselves or our loved ones needing long-term care. However, a majority of Americans 65 and older will need care at some point in their lives.
Anyone can develop a need for long-term care at any age, which can be expensive. Luckily, there are many ways to pay for long-term care.
LTC News wants to help you and your loved ones navigate long-term care. We believe access to long-term care information can help everyone make better future decisions.
In this article, we will explore several options for paying for long-term care. We'll also discuss which options may work better in different scenarios.
Options For Paying For Long-Term Care
There's no right or wrong way to pay for long-term care. In fact, there are many ways to cover costs. The right option for you or your loved one depends on your situation.
There are many reasons why someone may need long-term care. Some of us may need care due to aging; others may need care for injuries, disabilities, or illnesses. It can help to prepare for potential care expenses, even if you don't currently need long-term care.
Having a plan to cover care costs can alleviate future stress for yourself and your loved ones if the need arises. In this section, we'll cover the following methods for paying for long-term care:
Out of pocket
Long-Term Care Insurance
Short-term care insurance
Temporary coverage from Medicare or select health insurance plans
Government assistance programs
Paying For Long-Term Care Out Of Pocket
Many people pay for long-term care out of pocket, often out of necessity. However, using personal savings, assets, and income to cover the costs can be risky.
Many retirees live off the income from investments like stocks, savings, or supplemental social security benefits rather than salaries or wages. Often these sources of income will support people well into their 80s.
But many times, we may not factor in the potential need for long-term care into our retirement plans. According to the Administration of Community Living, on average, women will need 3.7 years of care, while men will need 2.2 years of care.
Long-term care can get very expensive very quickly. If you or your loved one needs long-term care for an extended period of time, paying out of pocket can drastically reduce savings and assets.
It's possible to fill some gaps by selling investments and assets to pay for care. But this can reduce income and make paying for and planning for future care needs and other living expenses even harder.
The only way paying for care out of pocket would be effective is if you knew your care needs would be short and inexpensive. But the issue is no one can predict how much care they'll need in the future. That's why many people turn to less risky options to cover long-term care, which we'll discuss below.
Long-Term Care Insurance
Some Americans choose Long-Term Care Insurance to help cover long-term care costs. LTC Insurance can help protect you and your loved ones from significant long-term care expenses. Most policies are also relatively affordable compared to paying for care out-of-pocket.
Long-Term Care Insurance is federally regulated to provide comprehensive coverage for long-term care. These regulations ensure consumer protections like easy access to care and stable premiums. Policies are also tax deductible.
You can customize a policy to meet your needs and budget. This includes how much money you want a policy to pay regularly and any add-ons that may appeal to you.
The downside to Long-Term Care Insurance is that not everyone can qualify. Anyone who already needs or is currently receiving long-term care services will not be able to qualify for a new policy. But if you already need care, don't worry—you still have options besides LTC Insurance.
RELATED: What Is Long-Term Care Insurance & What Does It Cover?
Short-Term Care Insurance
If you or your loved one needs something besides LTC Insurance, then you may want to consider short-term care insurance.
Short-term care insurance works similarly to Long-Term Care Insurance. The only difference is that, as the name would suggest, it only provides coverage for a short period of time.
That period is usually one or two years, depending on the policy. However, every bit of coverage counts when it comes to long-term care.
Most short-term care insurance policies have less strict health requirements. So, if you or your loved one wasn't able to get Long-Term Care Insurance, you might still be able to qualify for a short-term plan.
It's also important to note that most short-term care policies divide coverage into home/community or facility coverage. So, when picking a policy, make sure you or your loved one choose your preferred method of receiving care.
Temporary Coverage From Medicare & Private Health Insurance Policies
Medicare (including supplements) and private health insurance policies do not offer comprehensive or prolonged coverage for long-term care.
However, some health insurance plans may cover up to 100 days of skilled care. Skilled care is a smaller niche within long-term care. Skilled care can include wound care, therapy, and injection.
Health insurance doesn't cover the most critical part of long-term care. This crucial part is custodial care, such as help with activities of daily living.
After 100 days, neither Medicare (including supplements) nor health insurance will cover skilled care. That means it’s a temporary fix to a long-term problem. But it can give you the time you need to create a plan.
Medicaid & Government Assistance Programs
In some instances, Medicaid may be able to cover care costs as a last resort option. If you or your loved ones have limited resources to cover your long-term care costs out of pocket, you may be able to access Medicaid benefits.
While this may not be ideal, Medicaid can help you or your loved one get needed care. Medicaid covers most types of long-term care services and facilities. This includes home, community, and facility-based care.
Medicaid coverage is limited to those with little to no income or assets who meet certain requirements. Individuals can get coverage for their needs as long as they meet these requirements.
However, one drawback is estate recovery, which is when the government takes your estate after you pass away. This can only happen if you owe the government for the costs of Medicaid, have no living spouse, and have assets left to lose.
The government uses these funds and assets to reimburse itself for the cost of long-term care. Some individuals meeting certain requirements don't have to pay back all their expenses. This usually happens if they do not have enough assets to cover care costs.
Regardless of estate recovery, Medicaid can be a valuable resource for those without other options to pay for long-term care. For more information on Medicaid's long-term care coverage, visit the Centers for Medicare & Medicaid Services website.
Alternative Options To Cover The Cost of Long-Term Care
In some cases, you or your loved one may not be able to qualify for or afford any insurance option mentioned above. If you or your loved one are in that situation, you still have options.
One option is trying to reduce or lower your care costs to stretch savings so you afford more long-term care. Many communities and cities offer local long-term care services and programs that could help lower your costs.
Through these programs, you may be able to get long-term care at a discounted price or sometimes for free. Some programs also help seniors get grants for the cost of long-term care.
Another option to pay for care is a reverse mortgage. These tax-free loans allow older adults to borrow part of their home equity to cover the cost of care. However, it’s important to research reverse mortgages before jumping in.
How To Pay For Long-Term Care
Long-term care can be expensive. The good news is that you have multiple options when paying for long-term care. The most common ways to pay for care are out of pocket, Long-Term Care Insurance, and Medicaid. However, short-term care insurance and health insurance may be able to reduce or delay the impact of care for short periods of time.
The best option for paying for care will depend on your situation. Different methods work better for different people. However, one thing is certain, planning ahead for long-term care will save you money, time, and stress in the future.
LTC News has many FAQ articles to help you and your loved ones navigate long-term care. Here are a few additional articles you may be interested in:
How Much Does Long-Term Care Cost? - This FAQ article offers cost examples for different types of long-term care services and facilities. It also breaks down why certain services cost more.
How Much Does Long-Term Care Insurance Cost? – If you’re concerned about paying for long-term care, you may want to consider Long-Term Care Insurance. This FAQ article breaks down the costs of coverage.
LTC News Cost of Care Calculator - Are you interested in learning about the cost of care in your area? LTC News’s Cost of Care Calculator can help you estimate the cost of various facilities and services in your state. This calculator uses data from across the country to help you get a feel for the cost of care several years or decades into the future.