Sunday, October 7, 2012

6 Ways to Pay for Long Term Care?

By Susan M. Graham, CELA, Senior Edge Legal, Boise, Idaho


The U.S. Government has no money!   Can seniors expect help from the government to pay their long term care expenses? 

Who needs long term care?

People over age 65 have a 50-70% chance of needing care before they die.

What does it cost?

         At home:  $20 per hour to $15,000/month for 24-hour care

         Assisted Living:  $3,500 to $5,000 per month

         Skilled Nursing Care (Nursing Home) $6,000 to $10,000 per month

         Crabby/Difficult Senior:    $16,000 to $18,000 per month

What are the six ways to pay for care?

         Family and friends provide the care for free.

         Take money out of your pocket

          Long Term Care Insurance


          Veteran - Non Service Connected Disability (Aid and Attendance)


How do each of the six ways work?

  1. Family and friends provide the care for free. 

When a spouse becomes a caregiver, it increases the likelihood that they will die before the spouse who is being cared for.   If children are the caregivers, it ruins their lives.  They stop working early, lose out on wages and benefits, and have less time to spend with their own family and friends.  If they are paid without a written contract, this can create problems later if the person needing care wants to qualify for government benefits.

         2.       Pay “Out of Pocket,”  

Pay the expenses for you or your spouse from your funds until you run out of money.


         3.       Long-Term Care (LTC) Insurance.

You purchase LTC insurance.  You decide how much coverage you want in terms of a daily rate to pay for your care and for how long.  To qualify for and purchase LTC insurance, you need to be healthy and have the funds to pay the premiums.  Why buy LTC insurance?  You get the most flexibility to choose the location for your care and how the funds will be spent.  The worry about our government’s ability to pay for your care and everyone else’s care is lessened.

         4.       Medicare.

Medicare is a Federal HEALTH insurance program for people 65 and over.  

There is a short-term residential care component for Medicare if you qualify.   

                  You must be admitted to a hospital for 3 or more days. 

                  When you are discharged to a rehabilitative facility, you must participate in the rehabilitative activities and be improving.

                  If these two events occur, then Medicare will pay 100% for the first 20 days of rehabilitative care.  The bills I have seen for the first 20-day stay range from $6,000 to $30,000.

                  If you continue to be in rehab, Medicare will pay part and you or your supplemental health insurance will pay part of the bills for the next 80 days.

                  This benefit is being taken away with the hospital stating that a person is not “admitted” but rather is in the hospital for “observation.”  That means the patient is ineligible for Medicare coverage for subsequent skilled nursing care in a facility.

                  Also, this benefit is not available if the patient is not “improving” or participating in the rehabilitative activities.

         The result:  Seniors must pay for their post-acute care out of pocket or forego the treatment.


          5.  Veteran’s Non-Service Connected Disability (Aid and Attendance).

The Veterans program will help pay between $1,094 to $2,631 per month for long-term care in your home or a facility. 

How can this benefit be accessed?

         You or your spouse must be

                  Age 65 or older

                  Served 90 days on active duty

                  One day during wartime [1]

                  Received a discharge that is not dishonorable

                  Meet the income test

                  Meet the asset test


            6.  Medicaid (a loan program).

Medicaid is a State  and Federal program that provides for long-term residential care to people who are aged, blind or disabled.  Each state is responsible for administering the Medicaid prorgram in its state.  I will address the program for the “aged.”  Aged means someone is age 65 or older.

What is this benefit?  If a person qualifies, the benefit will pay for the cost of care in assisted living or a skilled nursing home facility that participates in the Medicaid program.  There are some funds to help pay for care at home, but frequently the payment is not enough to provide full care for an individual in their own home.

What does it take to qualify for Medicaid?

The applicant must be blind, disabled (using a social security definition) or age 65 or older.

                 The applicant must have a medical need.

 The applicant must pass an income test.  If they fail this test, it is often possible to take some steps to meet this requirement.

 The applicant has to meet an asset test. This test is complex and cannot be covered in this short article.

Once the Medicaid recipient (and their spouse) dies, the State is entitled to be reimbursed for the funds they paid out on behalf of the Medicaid recipient.

Summary:  What is the best way to plan for long-term care, when it is more likely than not to happen?

  1. Consider LTC insurance, even if you think you can self-insure.
  1. If it is too expensive or too late to get LTC insurance, contact an attorney who is familiar with Medicare, Medicaid and VA benefits to explore other alternatives.   Asset protection is only possible with the right tools.  The sooner planning is done, the more flexibility the individual and their family have for lifestyle choices and the greater the ability to protect a lifetime of earnings. 
  1. A Family Legacy Trust may fit to preserve assets, and help pay for care.
  1. Act now.  Don’t wait for a crisis, because then it may be too late to make choices that are best for the family.   Under the current law, to have the most flexibility in planning, it needs to start five years before a need arises.


This information is intended to be helpful and general and not intended as legal advice.   These rules for Medicare, VA and Medicaid benefits are complex and change frequently.

[1] WWII  12-07-41 to 12-31-1946, Korean 6-27-50 to 1-31-1955, Vietnam 2-28-61 to 5-7-75 for Veterans who served in Vietnam during that period, or 8-5-64 to 5-7-75 inclusive for all others, Persian Gulf 8-2-90 through present.


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