One topic duscussed in my free book - Strong - A Guide to Health & Estate Planning is Long Term Care. Its a topic that needs to be part of any planning consultation!
Long term care is defined as supportive medical, personal, and social services provided to individuals who are unable to meet basic needs for an extended period of time. Pennsylvania has one of the oldest populations in the country. Over 2 million Pennsylvanians are over the age of 65 and the United States Census predicts that by 2020 there will be over 350,000 Pennsylvanians over the age of 85! 70% of people over the age of 65 will require long term care and currently over 1.5 million Pennsylvanians receive benefits through the Commonwealth’s Medicaid program.
While many believe that long term care is strictly provided to an individual in a nursing home, it’s actually divided into three (3) categories: (1) nursing home care, (2) assisted living, and (3) home health/community based services. Nursing home care is the highest level of care provided to an individual and it’s reserved for one who is completely dependent on others to provide daily living needs. Assisted living is for individuals who don’t require nursing home level care. These people typically receive prepared meals, reminders to take their medication, housekeeping services, and some assistance with their “activities of daily life.” Finally, home health/community based services are for those who can remain at home but who require assistance. These persons are usually enrolled in adult daycare and Living Independence for the Elderly programs (aka “LIFE” programs). LIFE programs are offered by Medicare and a person must be 55 years of age or older to qualify. Further the LIFE programs require that the individual be able to live safely in a community based on a medical evaluation.
Nursing home care is the most expensive long term care option and there are five (5) ways to pay for it:
- Medicare (42 U.S.C. 1395 (d))
- Private Pay
- Long term care insurance
- Veterans pension benefits (38 U.S.C. § 1501 et sec)
- Medical assistance (aka Medicaid)
Medicare 42 U.S.C. § 1395 (d)
Medicare is a government entitlement program for people over 65 or those who are deemed disabled twenty-four (24) months after a five (5) month waiting period. Medicare, however, will only cover 100 days of long term care at a nursing home. It covers the first twenty (20) days in full but only provides $157.50 the remaining days. The average cost of nursing home care is approximately $293.15 per day.
A person doesn’t qualify for Medicare’s long term coverage simply because of age. To qualify, the person must have a three (3) day hospital stay within thirty (30) days of entering a nursing home. In addition, the person must require “skilled services” to qualify for Medicare’s long term coverage. Skilled services are defined as physical therapy, wound care, pain management, intravenous administration of antibiotics, the maintenance of intravenous lines and dialysis. Medicare won’t cover assisted living but only nursing home or home based services.
While private pay is an option for some, the average cost of nursing home care in Pennsylvania is currently $8,916.65 per month. Even a person with a substantial amount of liquid assets (cash or easily convertible investments) can deplete them very quickly. A person with $200,000.00 in liquid assets would deplete the entire amount in less than two years at a nursing home!
Long Term Care Insurance
This type of insurance covers the cost of nursing homes, assisted living and home based services. Lawyers don’t sell long term care insurance but they can work with an insurance representative.
You can purchase insurance to cover practically any event. When we think of insurance, most of us think of coverage to protect our home, our car, or our life in the event of our untimely death. While many buy insurance for events that will more than likely not occur (with the exception of death of course), the government estimates that 70% of us will require some type of a long term care prior to our death.
Long term care is medical and non-medical services which meet the needs of people with chronic illnesses or disabilities. These services include normal activities of daily life such as dressing, eating, or using the bathroom and can be provided in a person’s home, in an assisted living facility, or in a nursing home. While long term care is typically needed by people of advanced age, a doctor determines who qualifies for it based on person’s quality of life not age. Long term care is expensive and here are some annual cost statistics which may shock you:
- Cost of home health aide $47,911.00
- Adult day care $15,600.00
- Assisted living (one bedroom) $42,660.00
- Nursing home (semi-private room) $105,485.00
- Nursing home (private room) $113,150.00
Despite these high costs, Pennsylvania and the federal government won’t pay for your long term care unless your financial assets (real estate, bank accounts, and anything else that you own) are almost completely exhausted ($2,000.00 or less). If you reach a point where the government is paying for your long term care, it means that you have practically no assets and nothing to leave to your family after you pass away. Most people, however, want to leave something to ensure that the next generation has the chance to improve. If you do want to leave something to your survivors Long Term Care Insurance may be an option for you.
If you purchase a long term care policy through Pennsylvania’s Long Term Care Insurance Partnership, the Commonwealth will begin paying for your care at a much higher threshold. For example, a long term care policy with a value of $200,000.00 lets you qualify for Medicaid (the state paying for your long term care) when the value of your assets reach $200,000.00. Normally the government will only pay if your assets fell below $2,000.00. That $200,000.00 would be exempt from Pennsylvania’s Estate Recovery law and therefore available to your heirs upon your death.
You can purchase a long term care policy in Pennsylvania through its partnership program if you are between 40 -72. Rates obviously vary based on your age and health. The longer a person waits to apply for long term care insurance the greater chance that they won’t qualify for a policy due to a health condition. While only 16% of persons ages 50-59 don’t qualify for a policy, over 40% of persons between the ages of 70-79 don’t qualify for a policy.
In addition to age there are a number of health conditions and medications which also might make a person uninsurable. Long term care insurance through Pennsylvania’s partnership program may be an option for you especially if you are in relatively good health and intend on leaving something to your family upon your death. If you are interested in this type of insurance coverage speak to your attorney who can refer you to a qualified agent.
Veteran’s Pension Benefits (38 U.S.C. § 1501 et sec)
The government offers a pension to certain military service members through the Department of Veteran’s Affairs. Military service, however, isn’t the only requirement for these benefits. To qualify the individual must have served at least 90 days of active military service during war time. In addition, the veteran must have received a discharge with the following characterizations: honorable, general, or other than honorable (OTH). A veteran who received a dishonorable discharge is not eligible for these benefits. A veteran must have limited annual income which cannot exceed maximum annual pension rate which is currently $12,868.00 for single veterans without children and $16,851.00 for veterans who have at least one dependent. In addition to income, the veteran’s net worth must be less than $80,000.00 (2015). While the VA requires that the veterans to be disabled, any veteran over the age of 65 is disabled.
Medical Assistance – Medicaid (42 U.S.C. § 1396)
The U.S. Department of Health and Human Services estimates that 40% of persons who reach age 65 will enter a nursing home. 10% of these persons will remain in nursing homes five (5) or more years. The average cost of a private room in a nursing home is $70,080.00 a year, or about $193.00 a day. Medicare only provides up to 100 days of Long Term Care Services and therefore about half of all nursing home residents pay the costs out of their own pockets. After these assets are exhausted, most people become eligible for Medicaid. Medicaid pays most nursing home costs for people with limited income and assets. To qualify for Medicaid, the government requires that one’s assets not exceed $2,000.00.
Medicaid is a combined federal and state program designed to meet the healthcare costs for the indigent. It is based strictly on financial guidelines and has nothing to do with a person’s age, condition, or other health needs. Medicaid eligibility is based on the value of a person’s “nonexempt” assets. The value of exempt assets are not included to determine a person’s eligibility for Medicaid. Nonexempt assets include cash, bank accounts, money markets, CDs, stocks, bonds, mutual funds, retirement accounts owned by the applicant, some annuities, most inheritances, additional vehicles, second homes, and any property or asset owned by a revocable trust.