Archive for August, 2010

How Are Long Term Care Services Paid For?

August 16, 2010

There are only three ways to pay for Long Term Care services.

  1. Government programs
  2. Self-funding (self-insurance)
  3. Long Term Care insurance

 

Government Programs

    Medicare: A federally-funded entitlement program for people age 65 and better.  Provides a built-in 20-day nursing home “policy”.  If you jump through all the hoops (including a three-night hospital stay and continuing ” to show improvement”), Medicare will pay all the costs of a nursing home for the first 20 days of care.  For Days 21-100, you then pay the first $137.50 per day (in 2010) and Medicare pays any excess.  Beyond Day 100, you pay all costs and Medicare pays nothing. 

    Medicaid: A shared federal/state welfare program that generally pays for the costs of nursing home stays.  To qualify for Medicaid you cannot have too much in assets, too much in income, or too much in self-sufficiency.  A married Colorado couple’s combined assets cannot exceed $111,560 in 2010 (not counting equity in a home and several other “exempt” items).  For a person who is not married, the asset limit is $2,000…this is not a typo! 

People who have not done any Long Term Care planning will sometimes give away assets to get below the limits.  Any transfer of assets for less than fair market value (i.e. a gift) within five years of being “otherwise eligible for Medicaid” generates a penalty period of Medicaid ineligibility.  The greater the value of the transferred assets, the longer is the penalty period.  The penalty period begins when you are “otherwise eligible…”.  “Otherwise eligible for Medicaid” means you have the required objectively measured physical or mental inability to take care of yourself, your assets are below the $111,560/$2,000 maximums, your income is below the permitted amount, and you are ready for nursing home admission. 

    VA (Department of Veteran’s Affairs):  The primary Long Term Care benefit available to veterans is the Aid and Attendance Pension.  To qualify, a veteran must have served on active duty for at least 90 days during a time of war.  A wartime veteran’s surviving spouse may also be eligible.  There is a complicated financial eligibility formula as well…the veteran cannot have more than about $80,000 in assets.  Let me know if you think yourself or a loved one may qualify and I will refer you to someone who can help.  On a personal note, I am a wartime veteran (Air Force) but do not qualify.

    CLASS Act: Included in the Health Care Reform bill.  No enrollments will be permitted until 2013.  Because of a required five-year “participation period”, the earliest possible benefit payments cannot happen until 2018.  This Government program has very limited benefits.  Two requirements in the Act will come together to ratchet up the cost to consumers: 1. No one can be turned down and 2. The law requires the plan to be self-sustaining (i.e. no government subsidy).  This guarantees that coverage under the CLASS Act will be more expensive than comparable and readily-available commercial Long Term Care insurance for people who are in good health.  Many details have not been finalized.  I will revisit the CLASS Act in future eNewsletters as more becomes known.

Self-funding: An individual with at least $1.5 million is assets or a couple with at least $3.0 million could most likely self-insure.  But why would they?  When you look closely at the numbers, it does not make good business sense to self-fund the open-ended risk of Long Term Care.  Please see High Net Worth and Long term Care Insurance  in the June, 2010 Advisor edition for a more detailed explanation.

Long Term care Insurance:  The one method that preserves both personal dignity and net worth.  Long Term Care insurance does so by making choices available about where and from whom you will receive care and then providing the cash to pay for those choices.  Long Term Care insurance keeps parents from becoming a burden to their children and so much more.            

© Raymond Smith, The Long Term Care Specialist, 2010

The Cost of Long Term Care Services (2010)

August 7, 2010

Nursing Home: The median cost of a private room in a Colorado nursing home is $79,570 per year ($218 per day).  This amount will buy about 10 hours per day (at $21 per hour) of  home care from a licensed home health aide.  A Colorado nursing home semi-private room costs slightly less at $198/day.  Over the past five years, the annual compound growth rate of Colorado nursing home costs has been about 5%.  The national five-year nursing home cost growth rate has also been about 5%.

Assisted Living Facility: The Colorado annual median cost of an assisted living facility is $39,900 ($3,325/month).  This is for one-bedroom, single occupancy.  Colorado and national assisted living costs have grown by about 7% compounded annually during the last five years.  Many assisted living facilities allow a well spouse to live with the spouse needing care…for an additional charge.

Please note that the above nursing home and assisted living costs are for average cost facilities (technically median cost).  If you want something nicer than average, it will cost you more.  Secure facilities for people with dementia also charge more because of higher operating costs. 

Adult Day Care: The Colorado median daily cost of adult day care is $56.  Assuming 5 days per week and 52 weeks per year, the annualized cost becomes $14,560.  Adult day care is a real bargain for otherwise 24/7 caregivers.  Adult day care providers that do a thorough evaluation of their clients before accepting them are well worth the additional cost they may charge.  

Home Care (home health aide): The Colorado state-wide median cost of home care is $21 per hour.  This becomes $210 for a 10-hour day or $76,650 per year.  Note the similarity in costs between ten hours per day of home care and a private room in a nursing home.  Home care can cost more or less depending upon how many hours of care are needed per day.  Home care costs have only risen by 2% (compounded annually) for both Colorado and nationally over the past five years.  The cost of providing home care is almost entirely driven by the cost of labor.  It is my belief that as a smaller workforce begins to intersect with more older people needing care, the cost of home care will increase at a much higher rate than 5% per year.

 

The above median costs are for the entire state.  Metro-Denver is a little more expensive and the rest of Colorado, a little less.  Call me if you would like rates for a particular home care agency or facility. 

This article focuses on the cost of care, a very important factor in itself.  In future eNewsletters, I will discuss differences in quality of care and what to look for when selecting a care provider.  

 

© Raymond Smith, The Long Term Care Specialist, 2010. 

Data source: Genworth 2010 Cost of Care Survey, April, 2010.