Protecting Your Income and Assets
It's really about protecting your lifestyle.
The average time an individual spends in nursing home care is 875 days (2.4 yrs), but this is only what Medicaid covers and does not include home care and assisted living because Medicaid does not pay. Today people are living longer and they want to stay in their home.
Home health care can cost from $100-$400+ per day depending on the care needed. Most home care is non-medical "personal care and homemaker services" including things like: bathing assistance, meal preparation, shopping, laundry, homemaking, and other incidental services. Home care can also include more expensive "home health care" provided by nurses, physical, occupational, respiratory or speech therapists, audiologists, etc.
Community based care, independent living and assisted living, can cost $100-$200+ per day. The line between senior housing and assisted living is blurring. Some people prefer living in a community rather than living alone at home. Often meals and social activities are included.
Adult day care which can be medical or non-medical is provided on less than a 24-hour basis in adult day care facilities. Some people with a mild stroke, dementia or Alzheimer's may spend the day at such a facility while the spouse is homemaking or working.
The annual cost of nursing home care typically ranged from $42,000 to $190,000 and the average length of stay in a nursing home is 2.4 years. Since the median net worth of households headed by those of retirement age is about $83,000, it is clear that just two years in a nursing home could result in poverty for many who fail to plan for it effectively.
It is both your income and assets before and after retirement that will be at risk if you need long term care. Long-term care insurance provides access to quality care and income/asset protection. The state Partnership program provides protection from Medicaid spend-down.
Some people think they will save money by waiting to insure, but it will never be cheaper than today, especially if you have a change in health. The cost of waiting can be devastating to your income if you cannot qualify.
Comprehensive long term care insurance is what is most commonly available, which means that all forms of care; home care, assisted living, and nursing home are covered by the insurance. In most cases you could receive care at home, a hotel, motel, assisted living, residential care, nursing home, etc.
If you do not have long term care insurance today you are self-insured.
Uninsured Couple Example
John and Mary Jones are a typical household. They have a house that is worth $500,000. They have two cars, a fishing boat, and $200,000 in savings and CDs, they also both have 401K retirement accounts. In scenario one they do not have long term care insurance. John suffers a stroke that leaves him unable to work and requires long term care.
Without insurance they would be paying for John's care out of their savings. If John required skilled nursing care at $60,000 per year their savings would be exhausted after 3.3 years of care (at current rates) and it would leave Mary with no money for her care.
After spending down their assets, selling the second car and the boat John could apply for Medicaid. To qualify for Medicaid they can keep one car, one house, and a few other non-cash assets.
Once John was accepted for Medicaid a lien would be placed on their remaining assets (house) for future collection. If they had children, what could be passed on to the children is what is left after the lien(s) were satisfied.
Medicaid also has a "look back" period where they look to see if any assets have been transferred to avoid paying for Medicaid care. Currently the "look back" period is 50-60 months and either the federal or state governments can extend this at any time.
Of course it would be a different story if they had long term care insurance protecting their assets.
Do you think if John could go back to the day before his stroke and buy insurance he would have?
What Risks Are You Facing Every Day?
There are "four" main risks to our income, assets and lifestyle that we face every day.
One action that the US government has taken to help is with the 2005 Deficit Reduction Act which allows any state to set up a Long Term Care Partnership program to help protect assets.