Devastating Effects of Long-term Care
We plan for a lot of “what if questions” such as the cost of a new roof, replacing a car in five years or even the death of a loved one. Nothing can be more devastating than the impacts to the family of needing to provide long-term care for ourselves or parent. I have seen the emotional as well as the financial impact of such an event to the family. The cliché “how’s the patient? The patient is fine but the caregiver isn't doing too well”. I know for a fact that’s real issue.
Basically, it’s the one financial issue that everyone wants to avoid. Your retirement may go planed. On the other hand, you and your family may face the unexpected cost of long-term care. Contrary to what a lot of folks believe that cost is not covered by Medicare or Medicare Advantage plans.
This is the cost of getting help doing the basic activities of daily living: bathing, toileting, dressing, transporting, and feeding yourself. No one wants to think about being that needy or having to provide that type of help. It can be devastating for a grown child that have to provide the assistance to an elderly parent.
It’s a financial problem that crosses multiple generations. Who is going to perform those services, and what is the true cost? AARP estimates the average family caregiver spends $7,200 a year on transportation and other unreimbursed caregiving costs – discussed more later. But not all costs are monetary.
Is your parent going to move into the spare bedroom or are you going to build an extension on the house to accommodate your parent? Can the surviving spouse live alone at home after their spouse passes on? How frequently can you stop by to visit/help, or must someone be around full time, as in the case of dementia?
If you’re the one approaching that potential stage of life, your big question is whether you have set aside enough resources to cover these costs, without burdening your children, which may be steeper than you think.
The Cost of Family Care
AARP’s latest report on family caregiving costs is titled “Valuing the Invaluable” (www.AARP.org/caregiving). The key finding is harsh. AARP estimates family caregivers provided untold hours of unpaid care–they estimate worth such care is in excess of billion dollars per year! That’s in addition to the $7,200 the average caregiver pays in additional out-of-pocket costs for transportation and needs. Yet few, other than those directly involved, understand the impact and true long-term costs.
When an adult child – usually the daughter but I’ve witnessed a son-in-law stepping up as well, forced to step out of the workforce to care for one’s parent, losing their own retirement plan contributions , health benefits along with future promotions and higher-paid years of covered Social Security earnings, all impacting the caregiver child own chances for a successful retirement.
And it’s a problem that is projected to grow worse in coming years. According to the AARP report, adults aged 65 and older will outnumber children under the age of 18 for the first time. The sandwich generation of adults – those between 35 and 60+ will certainly be squeezed by the cost of caring for both children and aging parents.
Cost of assisted living and home care
If the thought of multiple generations living under one roof makes you wince, there is always the alternative of assisted living, daycare, or in-home care for your parents (or yourself). But those costs, too, are soaring. The pandemic revealed some of the frailties of state-run Medicaid programs, as state budgets were strained. And restrictions on immigration, along with childcare issues, have kept the labor market tight. The latest Genworth “Cost of Care” report may come as a shock to those considering the alternatives.
* The median national monthly cost of assisted living is now $4,500 per month – and much higher in major urban areas.
* The cost of a semi-private room in a nursing home now averages $7,800 per month. And the cost of a private nursing home room has soared to $8,700 per month.
* The national average cost of a home health aide was $27 per hour in 2021.
Again, those are national figures, but costs in large cities or areas with fewer workers can be significantly higher. Plus, every year inflation takes its toll, and prices rise. One of our clients recently paid over $6000 per month stay at Lake Taylor in Norfolk. Fortunately, he had a long-term care policy purchased many years ago which help cover the cost.
Covering the costs
There are two ways to deal with the costs of long-term care.
*One is to plan ahead and buy long-term care insurance. The two biggest drawbacks with this approach are: -significant increase in premiums resulting in people dropping it in their later years when they’re most likely to need it most. Plus the mindset of some, if they never use it they lose all those premiums.
*Another is a newer generation of long-term care policies which combine LTC coverage as a rider with life insurance. If care is not needed or used, the named beneficiary receives the death benefit. Premiums cannot rise.
“Medicaid planning” is an alternative – It’s a process of either spending down or transferring assets five years before needed to qualify for the state to take care of your or a loved one. Once you qualify you may be in a Richmond, Roanoke or someplace else not in your home area. That will be the subject for future discussion. In the meantime, I’m hoping that both adult children and aging parents will use this to broach the topic of planning for long-term care costs.
-- Now is the time to deal with this. Remember the cliché-- it’s too late to buy fire insurance when the house is on fire. The use of Medicaid is a discussion that can save emotional heartache more than money down the road.