Long term care planning

In short

A friend of mine once told me she had planned for everything but the day she could not tie her own shoes. If you are in your fifties or sixties, you have probably felt a little of that same worry. Long term care means help with daily living, like bathing, dressing, eating, and getting around. Regular health insurance does not pay for it, and neither does Medicare in the long run. Medicare's own materials explain that it covers only limited stays in a skilled nursing facility after a hospital stay. Some people set money aside, some buy insurance, and some lean on family, and each path has a price you can look up today. Start by writing down what care costs in your own town. Then talk it over with the people you love.

The whole of it

What it is

I once sat with a neighbor who had spent forty years fixing other people's roofs. He said his pride was never needing help. Then a fall changed that, and he found out what help costs. Long term care is the name for that kind of help. It covers the everyday tasks we all do without thinking, when age, illness, or injury makes them hard. Some of it happens at home with an aide who comes a few hours a week. Some of it happens in an assisted living community. Some of it happens in a nursing home with nurses on staff around the clock.

You have probably heard people say they will simply use Medicare. I understand why. After paying in all your working life, it is a fair thing to hope for. But Medicare is built for medical care, and long stays for daily help mostly fall outside it. The Medicare.gov page on long term care says so plainly. Give it a read.

How it works

A woman I know kept her mother at home for six years. She never called it a plan, but it was one. She gave up hours at work, learned to manage medicines, and spent her own savings on repairs. It was love, and it had a cost that never showed up on a bill. That is one way this works, with family carrying the load.

The other ways run through money. You can pay out of pocket from savings and investment accounts. You can buy a long term care insurance policy, which pays a set daily or monthly amount once you cannot do a certain number of daily tasks on your own. Some life insurance and annuity products now add a care benefit, and the fine print on those deserves a careful look. And if your money runs low, Medicaid may pay for care, but only after you meet strict income and asset rules that differ from state to state. Your state Medicaid office can tell you what applies where you live.

If you have ever tried to buy insurance after a diagnosis, you know how this goes. Insurers ask health questions before they sell you a policy. That is why timing matters. A person in good health at fifty five can often get coverage that a person with a new diagnosis at sixty five cannot. Premiums are also set by your age when you buy, so waiting has a price too. Policies can raise their premiums later. Ask each company about its rate history.

The numbers, and where to find yours

I like a plain number more than a clever phrase. So here is how to find yours. The tax rules give some help, and the figures shift each year, so I will point you to them rather than guess. Premiums for a tax qualified long term care policy may count as a medical expense on your tax return, up to an age based limit of the current figure, which the official source publishes each year. That deduction only helps if your total medical costs pass a floor of the current figure, which the official source publishes each year of your adjusted gross income. IRS Publication 502, called Medical and Dental Expenses, lays out the details.

If you have a health savings account, you can use it for qualified long term care premiums too, within those same age based limits. The contribution limit for the year sits at the current figure, which the official source publishes each year for self only coverage. IRS Publication 969 covers health savings accounts.

Now for what care costs where you live. The Administration for Community Living runs a site called longtermcare.gov, and it explains the kinds of care and how to think about paying. For local prices, call two or three home care agencies and two or three assisted living places near you. Ask for their monthly rates in writing. That call takes an afternoon. It turns a foggy fear into a figure.

A worked example

Let me tell you about a couple I will call Ruth and Dale. Ruth is sixty and Dale is sixty two. They have 400,000 dollars saved for retirement. They asked a local agency what a home health aide costs, and the answer was 30 dollars an hour. They pictured Dale needing help for four hours a day, five days a week.

Here is the math with every input shown. Four hours a day times 5 days is 20 hours a week. Twenty hours times 30 dollars is 600 dollars a week. Six hundred dollars times 52 weeks is 31,200 dollars a year. If that need lasted three years, the total would be 31,200 times 3, which is 93,600 dollars.

That number did not scare them once they saw it. It was about 23 percent of their savings, since 93,600 divided by 400,000 is 0.234. They could see the size of the thing. Then they asked what a policy would cost. A broker quoted them an annual premium of 3,000 dollars each. Six thousand dollars a year for two people, kept up for twenty years until they might need it, comes to 120,000 dollars in premiums, since 6,000 times 20 is 120,000. That is more than the 93,600 dollars of care in their example.

So the math did not hand them an answer. It gave them a fair way to argue it out. A very long stay could cost far more than three years of home care, and insurance is built to cover that risk. Saved money stays flexible if care is never needed. Ruth liked the peace of mind. Dale liked the flexibility. They talked it through over several evenings, and both felt heard. These figures are only theirs, made up to show the steps. Yours will differ.

Where it goes wrong

I have watched good people make the same few stumbles, and none of them is a sign of foolishness. The first is assuming Medicare or the family will cover it, without ever checking. The second is waiting until health problems shut the door on insurance. The third is signing up for a policy without reading how the benefit is paid, how long it lasts, and whether the premium can rise.

Another stumble is planning only for a nursing home. Many people would rather stay in their own house, and home care has its own price. It helps to plan for the place you would truly want to be.

Giving assets away to qualify for Medicaid is a risky move too. States look back over past years of transfers, and gifts made in that window can delay your eligibility. An elder law attorney in your state can explain the rules before you move any money. A few hundred dollars for good advice can save you a great deal.

One more thing. Do not carry this alone. Spouses and grown children are often stunned to learn what the plan is, or that there is none. A short talk now spares hard choices made in a hospital hallway later.

Questions to answer before you leave this page

Where would you want to receive care if you needed it, and does your family know? What does an hour of home care cost in your town, and have you called to ask? If you needed care for three years, could your savings carry it without hurting your spouse? Have you looked at what a policy would cost you at your age today, and what it might cost in five years? Do you know how your state Medicaid rules treat your home and your savings? Who would you trust to speak for you if you could not speak for yourself, and have you asked them? And what is one small step, a phone call or a conversation, you could take this week?