Understanding financial options for Long-term Care

By Chris Orestis

Long-term care is a reality that everyone will eventually confront — either for themselves, a loved one, or both — and it is an expensive proposition that too few people are prepared for or understand.

Unfortunately, most people don’t think about how they will pay for care until they are confronted by a serious health situation. And the worst time to start planning is in the midst of a crisis; the options to pay for care can be complicated and take some time to access.

The three primary ways to pay for care are with Medicare, Medicaid, or private pay.

1. Medicare is an “age-based” program that will cover the first 100 days of rehabilitation care in a licensed skilled nursing facility upon direct discharge from a hospital.

2. Medicaid is a “means-based” program that covers skilled nursing care. To qualify, an applicant must meet standards of medical necessity and meet set asset and income levels below the poverty line.

Applying for Medicaid can be a challenging process that requires the applicant to submit detailed medical and financial records. Medicaid will “look back” five years at financial records to make sure assets have not been hidden or transferred to family members.

3. Private pay primarily comes from an individual and/or a family’s savings, insurance, assets, and income. People who use private pay can choose any form and location of care they want.

Independent and assisted living, as well as most forms of home care, are primarily private pay. Nursing homes are primarily covered by Medicaid for people who can qualify. Skilled rehabilitation and hospice are primarily covered by Medicare.

Private Pay Options for Senior Living and Long-Term Care

Families need to do all they can today to prepare to fund long-term care and protect themselves from both the financial costs and the possibilities of legal liabilities.

There are actions that people can start taking to prepare themselves for future costs, and there are long-term care funding tools that people can use to address immediate need for care as well.

What are some of today’s options for private-pay funding of long-term care?

Long-term care insurance – These insurance policies will provide a fixed monthly payment to cover approved forms of qualifying long-term care.

About Us – The Lancaster County Office of Aging (LCOA) was established 45 years ago as a result of the passage of the Older Americans Act. This act directed states to develop a network of services and supports to help keep older adults healthy and independent.

The Pennsylvania Department of Aging was created to fulfill this mandate. In turn, a network of 52 Area Agencies on Aging (AAA) was established throughout the commonwealth to carry out this mission at the local level.

Lancaster County Office of Aging

Maintaining the independence and quality of life for Lancaster County’s aging population through information, protection, services, and community support

Our Philosophy: u Support the older person’s right to decide his/her own destiny. Encourage consumer self-determination and choice. u Support the older person’s right to risk. u Promote independence and dignity. u Avoid unnecessary/inappropriate institutionalization.

Funding for aging-related services is a combination of state and federal monies, with the Pennsylvania Lottery providing the major source of funding.

In Lancaster County, the AAA is part of county government. We are dedicated to providing Lancaster County residents, 60 years of age and older, with a wide range of informational resources and services as well as advocacy efforts and elder abuse protection.

The LCOA offers the following services:

• Information and referral services

• Long-term living assessments

• Home and community-based support services

• Protection from abuse and neglect

• APPRISE, Medicare, and related health insurance counseling

• Senior center services

• Adult daily living services

• Caregiver support

• Employment

• Ombudsman services

• Transportation

• Legal services

• Health and wellness programming

• Volunteer opportunities

For more information, please call us Monday – Friday from 8:30 a.m. – 5 p.m. at 717-299-7979/1-800-801-3070, visit our website at www.lancoaging.org , or email aging@co.lancaster.pa.us.

Long-term care insurance can be purchased as a stand-alone policy or as a life/LTC hybrid policy. The younger and healthier a person is when buying a policy, the more affordable their premium rates and the likelier they will qualify.

LTC life settlements – A life settlement can be used to fund a long-term care benefit plan, which is similar to a health savings plan. This LTC benefit plan is an irrevocable bank account that is professionally administered with payments made monthly to long-term care providers.

Medically qualified policy owners who use an LTC life settlement are able to immediately direct tax-exempt payments to cover their senior housing and long-term care costs.

Veterans Aid & Attendance benefit – Veterans of active combat duty and/ or their spouses are eligible to receive monthly benefits paid directly toward qualifying long-term care service. Like Medicaid, the applicant must meet both medical necessity and income/asset level requirements to qualify.

Reverse mortgage – Homeowners with little to no remaining mortgage balance who are age 62 or older can qualify to take a HUD-backed home equity conversion mortgage (HECM) loan against the home in the form of a lump sum, monthly income, or a line of credit.

To qualify, the home must still be the primary residence, and the loan must be paid back with interest and fees after the homeowner dies (typically through the sale of the property).

Senior living loans – These are loans that can be secured specifically to pay for long-term care services. These loans are unsecured by collateral and instead are guaranteed by family members who co-sign (one or more).

Interest rates are similar to a credit card, and the loans are typically between $50,000 and $500,000 for a term of one year or less.

Medicaid-compliant annuity – A single-premium immediate annuity can be purchased to set up a guaranteed income stream for a spouse while the annuitant qualifies to go onto Medicaid and into a nursing home.

It is an irrevocable annuity established for a period equal to or less than the remaining life expectancy of the annuitant. The state is named as the remainder beneficiary to receive any funds after the annuitant dies.

The key to successfully navigating any long-term care situation is to understand your financial options and understand the differences among what will be covered by Medicare, Medicaid, or private pay. Planning and informing yourself as far in advance as possible is best, but there are also a number of funding options available that can help people address a sudden and immediate need for care.

Chris Orestis, CSA, is president of Retirement Genius (retirementgenius.com) and is a nationally recognized financial, health/LTC, and retirement issues expert. With over 25 years’ experience in the insurance and long-term care industries, Orestis has authored three books on aging and is credited with pioneering the Long-Term Care Life Settlement over a decade ago.