Understanding and Paying for Long-Term Care

The consequences of old age, chronic illness, and cognitive impairment are often debilitating and can be devastating for affected individuals and their family members. According to the U.S. Department of Health and Human Services, more than 70% of people over age 65 will need some type of long-term care during their lifetimes — care that is not covered by Medicare or most basic health insurance plans. If you fall outside the qualifications for Medicaid, you may find yourself at a crossroads in deciding the next steps for care, which could cause financial and emotional stress at an already trying time. 

This article will guide individuals and familial caregivers on understanding long-term care and accessing this essential service even in the midst of difficult circumstances or financial hardship. 

Defining long-term care 

At the mention of long-term care, people’s thoughts often veer towards the emotional impact of stressors like growing old and sending relatives to assisted living facilities. While these are important considerations — and it is imperative to discuss the hardships that may arrive in the future — it may also be helpful to take a step back and reconsider long-term care from a purely objective lens in order to make necessary healthcare decisions. 

From this perspective, long-term care can be seen as another retirement service that many will inevitably need to invest in to ensure their or their loved one’s safety and security amidst old age and/or debilitating illness. 

Care qualifications  

While it’s true that those who need long-term care are often undergoing difficulties from old age, chronic illness, or progressive conditions, healthcare and insurance providers use a more specific metric to determine necessity. In order to qualify for long-term care, a person must not be able to independently accomplish two or more of the six Activities of Daily Living (ADLs): bathing, continence, dressing, eating, toileting, and transferring.  

Essential considerations 

When contending with the possibility of requiring long-term care, you should consider the decision from two equally important perspectives:

  • If needed, how would long-term care help your family? Long-term care might be a strong protective measure against unforeseen developments and adverse effects on loved ones, such as children and spouses. Determining who will be primarily responsible for care and that party’s financial state can protect family dynamics and mitigate future issues before they happen.

  • How will you choose to pay for long-term care if you need it? It’s also important to look at obtaining care from a logistical angle. Which options will you or your family choose if long-term care becomes necessary? Do you have the resources to self-fund, do you qualify for government assistance, or should you consider securing an LTCI (long-term care insurance) plan? 

Levels of care and average costs  

“Long-term care” is an umbrella term under which there are different levels of care. Annual costs for these services vary in Maryland, according to data collected by OneAmerica:  

  • Informal care happens when family members take the lead without compensation, at an annual price of about $75,064 per home.
  • Home care involves nursing staff visiting the individual’s home on a regular basis for care. This option costs about $56,512 per year per home. 
  • Those housed in assisted living facilities have about $72,386 to secure annually. 
  • Finally, nursing homes round out at the highest average price point in Maryland – about $134,025 per household. 

Types of LTC insurance 

Long-term care can quickly become expensive. If you choose to pay for care through an additional healthcare insurance plan, you have several options to choose from: 

  • Traditional: This common and widely-available LTCI plan is granted based on ADL assistance needs or instances of cognitive impairment. Providers reimburse the cost of care up to policy limits, and the plan includes a monthly stipend for the 2-6 year coverage period. Premium payments tend to rise with inflation, so timing is an important factor when considering this plan option.

  • Hybrid: With more time flexibility in paying premiums and up-front cost estimations, hybrid LTCI plans are an optimal alternative to traditional coverage. Recipients can be reimbursed for 100% of the premiums they paid throughout their plan period if they don’t need to use the services as expected. Heirs receive a guaranteed death benefit in the individual’s name should they pass away.

  • Accelerated benefits rider: Finally, those needing LTCIs have the option to add an accelerated benefits rider to their preexisting plans. This addition allows recipients to borrow against their death benefits to pay for care — and awards an additional death benefit to surviving family members. 

Obtain long-term care with professional support 

Even with the knowledge that long-term care may become necessary for you or a family member in the future, determining how to secure it can be difficult — and that difficulty is only compounded by financial concerns or a lack of knowledge about related legal matters, like estate planning. Luckily, you can find helpful resources within your reach when you seek professional assistance: 

  • Certified public accountants (CPAs) possess a deep knowledge of tax laws; they use this knowledge to assist those seeking coverage with finding tax write-offs and other ways to make care as affordable as possible.

  • Certified financial planners (CFPs) are there to help build long-term care plans by configuring assets in the most advantageous ways possible while remaining legally sound.

  • Attorneys with decades of experience can assist with estate issues and planning when necessary.

Since 2014, Chesapeake Growth Network has been a strategic partnership between all three of these essential services – CPAs, CFPs, and experienced attorneys — that provides education and services to small businesses and families from Bowie to Annapolis. Those seeking assistance securing long-term care for themselves or a family member can rely on CGN for comprehensive financial and legal services. You can feel secure knowing you don’t have to face these decisions alone — our team would be happy to speak with you and help you consider your options based on your individual circumstances. From there, we can ensure you are ready for this important life transition. 

Contact Chesapeake Growth Network for more information on how our team can help you access and pay for quality, affordable long-term care. In our next article, we’ll guide businesses on the different structures they can utilize for successful succession planning.

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