Long-term care in residential facilities such as nursing homes is a financial challenge for many. When dealing with a loved one who is disabled, elderly, or ill, families often try every other type of long-term care first. Because nursing homes provide more health care services than some of the other options, the costs are significantly higher. Before committing to a nursing home, explore both assisted living and home care and compare their services and costs. You only need a nursing home for rehabilitation or long-term care when you need skilled nursing care and help with assisted living services. If you’re thinking about how to cover nursing home costs, it may help to talk to a financial advisor. Try SmartAsset’s free advisor matching tool today.
Nursing home costs
Nursing homes differ from assisted living in that there is a 24-hour skilled nursing staff available to continuously attend to patients’ medical needs. Nurses may be registered nurses, licensed practical nurses, or certified nursing assistants available depending on the level of care offered by the facility. Nursing homes also provide assistance with daily living activities.
A 2020 Genworth Economic Cost of Care Survey found that the average daily cost of a semi-private room is $7,756 per month, or more than $93,000 per year. Alaska is the most expensive state for home care, while Texas is the cheapest. Sometimes, people only need a short-term nursing home stay. Most of the time, the nursing home stay is longer. The National Center for Health Statistics released a 2019 report showing that the average length of stay in a nursing home is 485 days. This cost is for basic room and board only. If special services are needed, that’s extra.
The national average cost of living in a nursing home is $255 per day and $7,756 per month for a semi-private room. For a private room, that comes to $290 per day and $8,821 per month. For assisted living, the national average cost is $4,300 and $4,576 for home care with caregivers.
If you have access to Home Health Services, they can provide home help for up to 35 hours a week with Medicare payment. Home care should include skilled nursing care, although Home Health can help with light cleaning duties. You’ll have even better luck using Home Health Services for recovery. Medicare will cover occupational therapy, speech therapy, and home physical therapy for up to 60 days. You must have a doctor approve a care plan and go through a Medicare-certified agency.
If you need long-term home care or even permanent home care, then you need to weigh your payment options. Some take out a reverse mortgage to help cover the cost. A reverse home loan taps the equity you already have in your home. Before taking out a reverse mortgage, carefully study the terms of the mortgage and verify the credentials of the lender. A reverse mortgage must be repaid although it is usually repaid when the home is sold.
Others use retirement accounts. If you have a 401(k) or similar account or a traditional Individual Retirement Account (IRA), then you should talk to a tax or financial advisor to determine the tax implications of liquidating your account before you do anything.
Long Term Care Insurance
Long-term care insurance is a great option to pay for home care if you plan ahead and have a policy for several years. Pays for certain home care expenses, depending on the policy. All long-term care insurance policies are not created equal. Older policies, in particular, are very varied in their terms. You don’t want to spend years paying a premium for a long-term care insurance policy and then have it be of little use. However, after 65, 70% of us will need long-term care for some reason at some point, so it pays to be prepared.
Many of the newer long-term care policies are attached as riders to permanent life insurance policies. The rider allows the policyholder to access a portion of the face value of the life insurance policy to pay for long-term residential care, such as nursing home care. It’s often wise to get help from a financial advisor when choosing a long-term care insurance policy, as they tend to vary widely and you don’t want to pay for something you won’t be able to use.
It’s important to know that most long-term insurance policies don’t cover pre-existing conditions – those you may have had before you took out the policy. These would include diabetes, cancer and heart disease. These policies also usually don’t cover long-term care for things like alcoholism, drug abuse or addiction, mental illness, or self-harm.
Medicare will usually cover the first 100 days of a nursing home stay. It is for short-term intensive recovery from injury or short-term illness. It does not cover long-term nursing home stays unless you buy a Medicare Advantage (Part C) policy and that policy has nursing home coverage. A Medicare Advantage policy has benefits that you pay for over original Medicare. Check with your provider before you buy a Medicare Advantage policy if you want nursing home coverage.
Medicaid is usually the last resort funding source for home care, but unless you’re wealthy or have a good long-term insurance policy, many people have to turn to Medicaid. There is a Medicaid program in every state that pays for home care if you can’t pay for it yourself.
Medicaid involves strict and complex “means testing” of your income level and assets. Generally, an applicant over age 65 cannot have more than $2,523, in 2022, in income each month. For a married couple, your income cannot exceed $5,046 per month. There is also an “asset test” with Medicaid to determine eligibility. You can’t have more than $2,000 in assets to qualify for Medicaid to pay for your nursing home stay. Your home, car and home furniture are usually exempt. A spouse cannot have more than $2,000 in assets. Your bank records are also analyzed to make sure you haven’t made a large transaction in the last 2-5 years that would make it look like you were moving assets to avoid liquidation from Medicaid.
Affordable long-term care for the elderly or disabled is a major issue and ongoing problem in the U.S. Deciding on options for yourself or an elderly relative is a complex process. In some cases, you can use a combination of private fees and a government scheme. In other cases, a government program may need to cover some or all of the cost if you need extended care for a long time or permanently.
Tips for extended care
A financial advisor may be able to help you find long-term care options. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors serving your area, and you can interview your advisors at no cost to decide who is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Retirement and long-term care planning aren’t always easy. For help, check out SmartAsset’s Retirement Tax Calculator to help you determine the most tax-friendly state to retire in.
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