Planning for Long-Term Care

In recognition of the importance of informing the public about long-term care planning, Congress declared November 4-10, 2007 “Long-Term Care Awareness Week.” This year alone, approximately nine million Americans over the age of 65 will require long- term care. Due to our aging population, it is estimated that by 2020, 12 million older Americans will require long-term care. A study by the U.S. Department of Health and Human Services estimates that those who attain the age of 65 will likely have a 40 percent chance of entering a nursing home. Of those who enter a nursing home, about ten percent will stay for five years or more. Long-term care is frequently associated with advanced age; however anyone, regardless of age, may require long-term care due to a chronic illness or disability.

Long-term care includes a variety of medical and non-medical services for a person with a chronic illness or disability. Long-term care includes support services such as assistance with daily activities such as bathing, dressing, and going to the bathroom. Services may be provided in the person’s home, at an assisted living facility, or in a nursing home.

There are some common misconceptions regarding Medicare and long-term care. It is important to note that Medicare does not cover most long-term care costs. Medicare will only pay for medically necessary skilled nursing home facility or home health care. Medicare does not pay for assistance with support services such as dressing, bathing, and going to the bathroom. These services are often referred to as “custodial care” and they encompass services that healthy people are capable of doing for themselves as part of their daily routine.

Many people confuse Medicare with Medicaid (also known within California as Medi-Cal). Medi-Cal is a state and federal program that pays for certain health services and nursing home care for people with limited assets and low income. Eligibility is based on income and personal resources. Answers to commonly asked questions about Medi-Cal may be found on the California Department of Health Services website at http://www.dhcs.ca.gov/services/medi-cal/eligibility/Pages/Medi-CalFAQs2014a.aspx. Unlike Medicare, Medi-Cal has the right to seek reimbursement for benefits paid from your estate.

Planning Ahead: Steps to Choosing Long-Term Care

The best time to consider long-term care is before you need assistance. You should discuss with your family the type of long-term care services you might require someday, what options you would prefer, the cost of such services, and how the services would be paid for.

According to Medicare, these are the steps you should take in formulating a long-term care plan:

1. Assess your needs. Think about the services you need now, or will need in the future. For a comprehensive list of the services you may need, visit the Medicare website

2. Research the financing and care choices. You will want to discuss your options with your doctor, your financial advisor, and your family. For further discussion of your long-term care options, see the latter part of this article.

3. Find out what is right for you. Consult your friends and other people you know who have utilized long-term care options and ask them how happy they are with their long-term care arrangements. Speak to a long-term care ombudsman. You can find the local long-term care ombudsman’s contact information at the California Department of Aging’s website. Call the State Department of Health for information on a nursing home or other long-term care facility you are considering. Visit their website at http://www.dhcs.ca.gov/Pages/default.aspx for information on inquiries on the facility’s license status and certification.

4. Visit your available options. Make an appointment with the program coordinator or care supervisor prior to your visit. Ask questions during your visit, and look around carefully. Speak to staff members, residents, and if possible, family members of residents. Ask yourself the following questions:

   • Did they listen to me and make me comfortable?
   • Did I get the opportunity to ask all of my questions?
   • Did they give me understandable answers?
   • Are the program staffers helpful and respectful?
   • Does the facility or program meet my needs?
   • Does the facility offer activity programs that I enjoy?
   • Is the facility clean and pleasant?
   • What are the applicable costs and fees? Can I afford these fees?

It is important to note that most people rely on a combination of sources to meet their long-term care needs. A combination of support resources, including family and friends, community services, private funds, and if necessary, government resources, are often necessary to provide the support you need in the setting of your choice.

How Much Do Services Cost?

The cost of long-term care services varies greatly according to the type of services you need, how often you require such services and the geographic location where you live. According to the American Association for Retired Persons (AARP), the average U.S. costs in 2006 were as follows:

• $5,566 a month for a semi-private room in a nursing home
• $6,266 a month for a private room in a nursing home
• $2,968 a month for a unit in an assisted living facility
• $19 per hour for a home health aide

Costs add up quickly. For example, if you require assistance with bathing and dressing three times a week, the services of a home health aide at $19 an hour (with a three hour minimum) would be $57 x 3 times a week, or $171 a week. This amounts to nearly $9,000 a year.

Long-Term Care Options

There are a number of options available to finance the cost of long-term care. The following is not intended to be an exhaustive list of all available financing options, but rather a partial list of some of your available private financing options.

Personal savings and investments: Also referred to as “self-insuring”. This option requires long-range planning for long-term care, as you will need to calculate your approximate cost of long-term care and save accordingly. Long-term care is very expensive, and you may end up exceeding your personal savings and investments. However, if you set aside enough money, you can choose how and where to receive your care and you will not have to worry about qualifying for other options, such as long-term care insurance.

Private Long-Term Care Insurance: Premiums vary depending on your age and health at the time you acquire the policy, and the amount of coverage. Purchasing long-term care insurance is an important decision; be certain to check on the reliability of the company from which you are purchasing the policy, and that the company and agent you are purchasing from are licensed to do business in California. To check on the license status of a company or agent, visit the California Department of Insurance website. Keep in mind that the amount of coverage may vary widely from policy to policy; be sure to obtain in writing a full description of what the policy will and will not cover.

Reverse Mortgages: A reverse mortgage is a special type of home loan that allows you to convert your home equity into cash. Unlike a traditional home loan, no repayment is required until the borrower no longer uses the home as his or her principal residence. To evaluate whether a reverse mortgage is right for you, visit the AARP or U.S. Department of Health and Human Services websites for further information on reverse mortgages.

Financing long-term care requires careful planning. You should consult with your financial advisor, tax professional and estate planning attorney regarding your options. Some options may have adverse tax consequences or may result in a smaller estate to pass to your heirs.

Estate Planning Considerations

Review your estate planning documents to make sure they accurately reflect your wishes not only in the event of your death, but also in case you become incapacitated. You may wish to schedule an appointment with your estate planning attorney to review your documents. Your attorney will be able to advise you on any changes in the law which may impact your existing documents, such as the Economic Growth and Tax Relief Act of 2001 which effects estate taxes and generation-skipping transfer taxes, and the Health Insurance Portability and Accountability Act, which may impact your health care directive.

Long-Term Care Resources:

Planning for long-term care requires thoughtful consideration. Throughout this article you will find links to helpful resources. In addition, here are some links to other resources with useful information on long-term care:

For further information on statistics on aging and long-term care, visit the Center for Disease Control Prevention website.

The U.S. Department for Health and Human Services website has information on caregivers, nursing home and assisted living facilities, Medicare and Medicaid.

The American Association for Retired People (AARP) website has information on long-term care planning, housing and care options, and how to finance your long-term care.

The California Department of Insurance website has a webpage with information on insurance issues for senior citizens.

If you have further questions regarding long-term care planning, we invite you to contact us to discuss your questions and specific needs. The attorneys at the San Diego estate planning firm of Law Offices of Scott C. Soady, APC have particular expertise in the areas of estate planning and elder law. Contact our office by e-mail or call us toll-free at (877) 435-7411 within California, or (858) 618-5510 outside of California to schedule a free in-house consultation.