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Medicare and Long-Term Care: Costs and Funding Options for Coverage Gaps

America’s rapidly aging population is creating a pipeline of seniors who need or will likely need long-term care. It is estimated that more than 6 million Americans have a clear need for long-term care due to cognitive decline or an inability to perform at least two daily living activities. It’s expected that 15 million Americans will require long-term care by 2050. Combine those statistics with a projected 110 percent increase in the number of new Alzheimer’s cases between 2010 and 2050, the exorbitant cost of long-term care, the high price of long-term care insurance, and gaps in Medicare coverage, and you have the makings of a healthcare crisis.

The Costs of Care

Americans depend heavily on Medicare coverage as they grow older; however, Medicare is of little use where nursing home and assisted living care are concerned. Consider the financial burden of having to pay more than $6,000 a month out of pocket for a semi-private nursing home room, more than $3,600 a month for a room in an assisted living facility, $20 an hour for a home health aide, or $68 a day for adult day care. Those are daunting figures, particularly for someone who’s not prepared for the out-of-pocket costs of long-term care.

Home Improvements

There are many ways to prepare for long-term care, and not all of them have to do with finances and insurance. You can make your home a safer place so you or a loved one can age in place. Mobility is often an issue for seniors, so make sure all external and internal doorways are wide enough to accommodate a wheelchair (at least 32 inches across, according to the Americans with Disabilities Act). Safety precautions might include getting rid of small rugs, adding handrails on both sides of your stairways, and installing grab rails alongside the toilet and in the bathtub.

Being Prepared

It’s a good idea to begin preparing for long-term care as early as possible. That means understanding your coverage options under Medicare and Medicaid, knowing how to use insurance as a financial asset, and strategizing alternative forms of funding that may become necessary to fill the financial gaps that invariably appear. Long-term care insurance is designed to provide financial support for long-term care, which includes those services that Medicare doesn’t cover, such as custodial and non-skilled care at home or in an assisted living community. It’s an invaluable financial safety net should you or a loved one require long-term care, but it can be very expensive. Insurance experts recommend acquiring a policy in your 50s or early 60s to avoid higher premiums, but there’s nothing to stop you from getting a policy even sooner. As of 2007, the average annual cost of a long-term care policy was just over $2,000.

Many people believe that a life insurance policy is a one-dimensional financial parachute for your beneficiaries/family. However, cash value life insurance can provide a dynamic source of funding for long-term care. You can access funds for long-term care in a number of ways: through accelerated death benefits, by selling your policy to a third party, or “surrendering” it to your insurer for a cash settlement.

Alternative Options

Older adults often need to access their personal assets to raise money for long-term care, particularly if buying a long-term care insurance policy isn’t a practical option. You can use funds from a charitable remainder or Medicaid disability trust to pay for care services, or you can access money if you have an immediate or deferred long-term care annuity, available to people up to age 85. Many seniors (age 62 and older) opt for a reverse mortgage, which provides a lump-sum or monthly payment, or a line of credit that can be used to pay for care expenses.

Medicare is an important resource for older adults, but there are definite limits to its utility. Preparing for long-term care means assessing the likelihood you or a loved one will need care, what services are available and how much they cost, and what funding options are available to help you. Remember, the sooner you begin preparing, the less you’ll pay in the long run.

If your mother and father are no longer able to keep up the family home …


It might be time to help them move gracefully into a smaller space. Time to be brave and give up your childhood room, despite the many fond memories you have of it!

Downsizing may be just what mom or dad needs to stay independent while also being able to pay utilities and insurance on that small social security monthly payment.

Make your parents part of the discussion

It may be tempting to just take over your mother’s life and do what you think is best for her. But that can be very insulting to an elderly person who has made her own decisions all her life until now. Unless she has become cognitively disabled, where to move should be her decision.

That said, your parent is likely to recognize that it’s time to move to a smaller place. Luckily, there are many attractive options. A condominium may be a good option because there’s no yard work, and you can look for one with an elevator. Condos are often more efficient than single family homes, and they often cost less to heat and insure.

If mom or dad still likes to garden, a small home with a front or back yard may be the best option. Tiny houses are all the rage. Look for one that is 600 square feet or so.

Consider “greening” Mom or Dad’s new home by installing good insulation, energy-star appliances, and LED light fixtures. That will substantially cut down on her utility bills.

Decluttering

Many people find the act of unloading half or more of their belongings incredibly liberating. You might be surprised at how willingly your parents will part with much of their clutter–especially if you offer to help them move it out of the attic.

Try to find good homes for things of value. You may find that your parents are much more amenable to giving up their dining room set if they know it went to a friend or grandchild.

Also, if you point out that a less-well-off family could use that living room suite, your parents may be better reconciled to parting with it. Little known fact: Goodwill Industries will make house calls for large donations of furniture. Salvation Army does the same thing.

If your parents have been maintaining your childhood bedroom as a shrine, it’s time to let it go. Give yourself and your siblings forty-eight hours notice to move their stuff and, if they don’t, give all of it away.

If a parent digs in his heels about giving up a few of his belongings, consider hiring a senior move manager to smooth things along.

Other services

Once you have mom and dad in a smaller home, you will want to set them up with other services that will help them maintain their independence. This is particularly critical if you live in another state and cannot check in on them every day.

Buy them a smartphone if they don’t have one already. Teach them to use Uber and Lyft. Teach them to use Google maps as a navigation service.

Don’t overlook good old Meals on Wheels, a federal program immune to budget cuts. The meals are so big and nutrient rich, mom and dad can get through the rest of the day on protein bars if they need to. Meals on Wheels are distributed locally, but people over 60 are generally eligible. Those without disabilities may have to pay around $150 a month.

If mom and dad are disabled, you can hire a care service to help them remain independent. Care services take care of daily chores like cleaning, cooking, and helping clients with bathing and dressing.

Whether you are near or far, today’s services and technology give you the peace of mind you need that your parents are safe and cared for.