Until there was an emergency, Stan Horwitz and his family had no arrangements for long-term care. Martin, his father, was a lone resident and was in his late 80s. He wasn’t eager to accept any help from his kids.
Stan and his sister once discovered their father, who had fallen, unresponsive in his living room. A series of medical problems began six years ago as a result of this incident. Martin was unable to go back to his house. Additionally, “the bureaucracy was intense” when attempting to organize his father’s finances, according to Stan.
He claimed that although his father was careful to save money, the cost of nursing care ate up his $300,000 life savings in just four years. Martin, who is currently 93, is able to receive Medicaid coverage for his skilled nursing care.
It is not rare for families to struggle to pay for long-term care services, and high inflation will probably make it harder for more families to do so as the expenses rise. The Horwitz family’s experience is not unique.
According to a recent survey, inflation has now surpassed staffing as the main issue for skilled nursing and senior home institutions. This is because tiny increases in vital running costs, such as food, supplies, and energy, are having a significant impact and are difficult to reduce.
What is the cost associated with long-term care?
The U.S. Department of Health and Human Services estimates that the probability of needing long-term care for the average 65-year-old is 70%. However, a study by the Arctos Foundation and HCG Secure found that 1 in 10 middle-class persons between the ages of 44 and 64 lack long-term care insurance. Additionally, a lot of individuals are unaware that Medicare does not pay for the costs of long-term care services, which can involve dressing and taking a bath.
Depending on the type of care and the area, expenses can vary greatly. According to Long Term Care Group, which offers services to the long-term care and life insurance industries, long-term care costs $50,000 per year at home and $100,000 per year in a nursing facility. However, LTCG discovered that the average cost of nursing home care in Connecticut was $165,000 per year and slightly over $70,000 in Texas.
Traditional long-term care insurance is costly
Unlimited coverage is uncommon in long-term care insurance policies. Age, gender, health, and other risk variables all play a role in the vast range of costs. According to the American Association for Long-Term Care Insurance, a healthy 55-year-old could pay $45,000 in premiums by the time they are 85 for a new policy with a $165,000 benefit.
When his parents needed daily care because of dementia and lung disease in their early 80s, Tom Beauregard worked as an executive in the health insurance sector.
“It was chaos, trying to figure this out as a family,” Beauregard, the CEO and founder of HCG Secure, remarked. “The real chaos came into the decision-making process and the lack of information from my parents.”
Knowing what options you have
He founded a business to assist middle-class families in understanding their options as a result of that experience. “You need objective experts to help you understand how to make transition plans, how long you can keep people at home safely, what kind of services you can bring in,” Beauregard said.
Medicaid eligibility for low-income adults is determined by a “lookback” that takes the last five years’ worth of assets into account. Many others in middle- to upper-class demographics opt to pay for their own long-term care, but experts warn that managing the escalating expenses of these services for elderly people may become more challenging.
“It’s one thing to go out less or drive less when prices of food and gas are going up,” Ken Latus, Northwestern Mutual’s vice president for long-term care products, stated. “Cutting costs or finding trade-offs for your care as you age is not as simple.”
“Plan early so that you can stay in the driver’s seat when the time comes,” Latus said.
There are insurance choices available to help pay the expenses, including both regular long-term care insurance and hybrid policies that combine long-term care and life insurance. These regulations “provide funds that can be used to cover care expenses down the road, as well as a death benefit payable to the insured’s beneficiaries if care isn’t needed,” Latus said.
Additionally, the insured person’s lifetime can access investment growth or “cash value” in the policy, which can be used to pay for long-term care services. Additionally, there are riders for inflation that can raise benefits by up to 5% annually.
“If people come to me for estate planning, and they haven’t thought about long-term care, I make them think about long-term care, because in my mind these two areas of planning are inextricably intertwined,” Evan Farr, an attorney specializing in elder law and estate preparation,
Communicating with your loved ones about potential care needs and preferences as you age is considered to be the most crucial step, according to experts.
In hindsight, Horwitz said he would have been more forthright with his father if they had discussed long-term care much earlier. “I’d say ‘Dad, we need to have a talk about your future and how you’re planning’ — and ‘Dad, this happens to everyone.’”