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Many people believe that when they grow old and need more extensive medical care, they will have Medicare as a safety net. That’s why it can be such a nasty surprise to learn that Medicare doesn’t cover some of the most basic requirements of long-term care, such as help with the activities of daily living. Assistance with these things often falls to the patient as an out-of-pocket expense – and once you see the high prices of care, you might find yourself scrambling to find the money to cover it.
According to the Genworth Cost of Care report, the national median cost of a home health aide is $27 per hour, while the cost of homemaker services is $26 per hour. This full-time care would equate to about $61,776 for a home health aide and $59,488 for homemaker services.1 Many seniors can’t afford those high rates for assistance.
Planning ahead for the potential costs of long-term care is vitally important. According to the Administration for Community Living, 70% of those who are turning 65 today will need long-term care in the coming years.2 And of that majority, most people haven’t begun planning for long-term care. Or if they have, they haven’t planned for the high dollar amounts they might need to fully enjoy their golden years.
Figuring out where that money will come from should happen right now, before any sort of long-term care needs arise. Let’s take a look at some of the financial options.
1. Long-Term Care Insurance
This insurance used to be a mainstay of elder care planning, but that’s been changing recently as the price of premiums goes up to unmanageable levels for many seniors. As the population gets older and many seniors are living longer – along with all the extra health issues that can bring – insurance companies have found themselves paying out more than they expected for the policies in force. That means that premiums continue to go up as the companies look to recoup their losses.
Is long-term care insurance worth it these days? The answer is yes, as long as you carefully choose what you need and do it before you reach the age of 60. After that, the cost of premiums will rise dramatically. Many policies cover both assisted living and nursing home stays, but look for a long-term care policy that covers home health, as this allows you to stay as independent as possible for longer. Those who wish to stay as independent as possible for as long as possible may wish to use medical alert technology, which is an affordable safety net for many seniors and elderly adults.
2. Carefully Consider Medicaid Rules
Some people might have Medicaid as their primary option when it comes to long-term care. If that’s the case, consider that you will have to deplete your assets rather significantly before Medicaid will kick in to pay the costs of care. To get that coverage, you must meet the asset and income requirements set forth by your state.
This can be surprisingly difficult to do. For instance, in the state of New York in 2021, you wouldn’t be eligible for Medicaid until your income was less than $15,900 for a single person and $23,400 for a couple. And as anyone who lives in New York knows, that level of income isn’t nearly enough to live on. Savings won’t help in this case, because to get Medicaid coverage, you must have less than $2,000 or so in assets, including bank accounts and the cash value of life insurance policies.
Carefully weigh if it’s worth giving up your assets, income, and other financial safety nets to get Medicaid coverage. If you believe this situation might apply to you, speak to an attorney and financial advisor as soon as possible.
In most cases, Medicaid will cover nursing home services; in some states, Medicaid will also cover home health services and even housekeeping services to allow seniors to stay in their homes as long as possible.
3. Shelter Your Assets
There are two potential ways to shelter your money and assets: by giving them as a gift or by putting them in a trust. Let’s look at each option.
· An irrevocable trust can allow you to shelter your assets but still obtain Medicaid eligibility. This trust transfers assets to a trustee and the terms can’t be changed without the approval of the beneficiaries.
· A revocable trust allows you the right to change the arrangement of the trust. These aren’t helpful for Medicaid eligibility but they can be advantageous in other ways.
· Beware of the penalty period after you transfer assets into the trust. Medicaid has a five-year “look-back” period, during which they look at your financial activity in the five years preceding your application for Medicaid. The creation of a trust might affect your eligibility and require you to pay a penalty before Medicaid will kick in.
· Gifting your assets to others can help you keep money for your heirs. The only problem with this is that when you gift your assets, that money is legally transferred to the other person. Be sure you are okay with this and that it meets Medicaid rules in your state before you make the leap.
There are many other ways to shelter some assets. Speak to a financial advisor to get the ins and outs of what to expect in your state.
4. Invest in Aging in Place Home Modifications
One of the best investments you can make in your golden years lies in your home itself. Specifically, home modifications that allow you to stay safe can also allow you to stay in your home longer. Small modifications, such as the installation of grab bars and raised toilet seats, can be enough to help you avoid injury. The cost of installation for non-skid flooring is much less than the costs of a hospital stay after a fall on a slick floor.
Talk with a local contractor about how to modify the home for an affordable price. Some modifications you can do on your own, but others will require professional services to make sure it’s done properly and safely.
Now is the time to look into those things that can make life easier and safer, but not break the bank while doing so. Alert1 medical alert systems are a great example. For as low as $19 per month, Alert1’s technology can ensure that you get the help you need when you need it. If you opt for the medical alert system with fall detection, you have even more protection: the fall sensors in the device can detect when a fall occurs and the device can reach out to the monitoring center on your behalf. The professional will stay on the line with you until help arrives.
5. Carefully Consider Investments
When you started a 401K or other retirement fund, you had a certain strategy for earning dividends. Perhaps you chose to invest some of your money aggressively while other sums of money were earmarked for slower growth and lower risk. As you get older and your priorities shift, talk to your financial advisor about how to structure your retirement funds – it might be time for aggressive investments.
6. Be Smart About Family Funds
There are some ways to preserve assets for someone else as you get older. For instance, a personal care agreement includes a set amount of money paid to a family caregiver for future services. If it’s structured properly by a skilled attorney, the money paid can reduce the size of the estate and help make you eligible for Medicaid. The money paid to the family caregiver can ease their financial burdens now and help ensure you have the help you need later.
Another option is to transfer assets to your spouse, as this is not penalized under Medicaid rules. A spouse is legally obligated to provide for care, so their assets will be considered for Medicaid eligibility purposes.
However, signing a spousal refusal might make the other spouse immediately eligible for Medicaid. How this works depends on the state you’re in. Contact an attorney to ask what your options are concerning spousal refusal.
7. Buy Yourself Time
Prevention of serious health problems can help you keep more of your money in your bank account. Chronic conditions are almost inevitable – according to the National Council on Aging, a whopping 95% of adults aged 65 and older have at least one chronic condition, and nearly 80% have two or more.3 But many chronic conditions can be managed well and with proper care, you can expect a normal lifespan.
Now is the time to be more vigilant than ever about protecting your health. Visit your doctor regularly and take your medications as directed. If you smoke, stop. Drink only in moderation, get plenty of sleep, and create a good diet and exercise routine. You are never too old to create healthy habits!
Paying attention to your good health now can ensure that you stay healthier for longer. Alert1 can help with that through the use of a medical alert bracelet or wristband. For a small affordable monthly fee, you get 24/7 monitoring. That means that you can press the button at any time, day or night, and within moments you will hear a friendly professional on the other end of the line, ready to help you. That peace of mind plays a strong role in reducing stress and anxiety as you progress in elder care planning.
