If you don’t have a plan to pay for long-term care, you need to create one before you and your family suffer the financial consequences. Long-term care refers to assistance with activities of daily living, like bathing and eating. Most seniors will need long-term care – and it can be incredibly expensive. To avoid financial ruin or a huge bill for your kids, you need to know how to pay for long-term care.

Shocking Long-Term Care Statistics

To understand why it’s important to plan for long-term care, just look at these statistics from the Administration for Community Living:

  • Someone who turns 65 today has an almost 70% chance of needing long-term care services at some point.
  • Men need care for an average of 2.2 years.
  • Women need care for an average of 3.7 years.

Assisted Living Facility and Nursing Home Costs

When people need more care than their loved ones can provide, they need to pay for professional services and may need to move into a long-term care facility. This isn’t cheap.

According to the Administration for Community Living, you could end up paying thousands of dollars for each month of care.

  • One month in an assisted living facility costs an average of $3,628.
  • One month in a semi-private nursing home room costs an average of $6,844.
  • An hour of a health aide’s services costs an average of $20.50.

At these rates, just one year in an assisted living facility will cost $43,536 and one year in a nursing home will cost $82,128.

The Cost of Unpaid Care

Many seniors try to stay in their homes to receive unpaid care from friends or family. However, this comes with a cost, too.

A 2020 report from the AARP and the National Alliance for Caregiving found that 53 million Americans are providing unpaid care. Among these caregivers, 45% say they have been financially impacted and 21% say their own health has worsened because of their caregiving duties.

The reality is that providing long-term care isn’t easy. It takes time, which can mean caregivers must reduce the hours they work at paid jobs, resulting in financial harm. It can also be physically and mentally exhausting.

If unpaid caregivers can no longer provide sufficient care – for example, if they become overwhelmed or if the person receiving care has increased needs – paid assistance may be necessary.

Filial Laws and Aggressive Collection Practices

You might believe that adult children have a moral duty to take care of their aging parents. In some states, they may actually have a legal and financial duty.

Filial responsibilities laws hold adult children financially responsible for the costs incurred for the care of their parents. This means that if a parent has to go to a nursing home, the child may be on the hook for the bill.

According to Nolo, filial responsibility laws are rarely enforced. However, there have been instances of long-term care facilities suing the adult child to cover costs. In one example, a Pennsylvania court ruled that a man had to pay his mother’s $93,000 nursing home bill.

As the population ages and more people need care they can’t afford, these lawsuits may become more common. According to NPR, nursing homes have developed a strategy of going after family members, and even friends of patients, for unpaid bills. In one county, 24 nursing homes filed 238 debt collection cases seeking close to $7.6 million between 2018 and 2021 – most of which were against friends or relatives. One attorney noted that nursing homes may prefer to go after adult children over the older residents receiving care because the adult children are more likely to have assets and wages to garnish.

Your Long-Term Care Payment Options

Most seniors will need expensive long-term care – how will you pay for your own care? You have a few options. However, some methods seniors count on don’t actually work.

You Can Use Savings – If You Have Enough

Using savings to cover long-term care costs may seem like the simplest option, but you need to make sure you have enough put away.

Estimating your costs can be difficult. You can look at averages, but you may end up needing considerably more than the average amount of care. In fact, the Administration for Community Living says that 20% of seniors will need more than five years of care.

Also keep in mind that inflation can impact costs. You may have enough savings to cover costs based on today’s prices but not nearly enough 10 or 20 years from now when you actually need care.

Health Insurance Doesn’t Typically Cover Long-Term Care

If you’re thinking the obvious solution is health insurance, think again.

According to the Administration for Community Living, health insurance may cover short-term periods of skilled nursing care when it is medically necessary.

However, long-term care is often non-medical. Many people who need long-term care need help with things like bathing, dressing, eating, and moving around. These types of activities are called activities of daily living. They’re important, but they don’t require skilled nursing care. Since this type of care is non-medical, health insurance does not typically cover it.

Medicare (Like Other Health Plans) Doesn’t Typically Cover Long-Term Care

Some people assume that Medicare will cover their long-term care costs, but this isn’t usually true. Just like other health insurance plans, Medicare only covers medically-necessary skilled nursing care – and, even then, the amount of coverage is limited.

You may qualify for up to 100 days of skilled nursing care through your Medicare coverage if the care follows a hospitalization for the same or a related condition. If you were not recently hospitalized, no coverage is available. After 100 days, coverage stops.

Some Medicare Advantage plans provide coverage for certain types of long-term care, such as adult daycare. This can be helpful for individuals who are aging in place but need some support. However, these benefits are not available in all plans and will not cover costs associated with a nursing home or assisted living care facilities.

Medicaid Only Provides Coverage If You Qualify

Medicaid does provide coverage for long-term care, but you have to meet state eligibility requirements first. This typically includes income and asset limits. In other words, you might have to drain your savings or “spend down” before you can qualify.

Some assets, such as your main residence, may not count when determining Medicaid eligibility. However, Medicaid may go after your estate to recoup costs. This means that your heirs may receive less than expected – or even nothing at all.

Long-Term Care Insurance Is One Solution

Although health insurance, including Medicare, won’t typically cover long-term care, there’s another type of insurance that will. Long-term care insurance is specifically designed to cover the cost of long-term care.

Washington recently created a state long-term care insurance program – the WA Cares Fund – that can provide a benefit of up to $36,500 for eligible individuals, with premiums taken from the worker’s paycheck. Other states may follow suit.

However, many people find that private insurance is the best way to secure the benefit amount they need. Premium costs can vary according to several factors including the person’s age, gender, and health as well as the benefit amount.

Life Insurance with a Long-Term Care Rider Is Another Option

Another option is to secure a life insurance policy with a long-term care rider.

Although policyholders most commonly use life insurance to gain a death benefit for a beneficiary after they die, some policies have benefits that can be paid out during the policyholder’s lifetime.

The long-term care rider allows the policyholder to receive part of the death benefit to cover long-term care costs. Claiming these benefits does mean the amount your beneficiaries receive will be reduced, but it can be a practical way to pay for long-term care without having to take out a separate policy.

Tackle Your Long-Term Care Plan

People spend a lot of time and energy planning for retirement, but they often neglect to plan for their long-term care. Since most retirements involve long-term care at some point, this is a huge oversight. By thinking about how to pay for long-term care now, you can help yourself – and your children – avoid financial headaches later.

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