When you’re young, or even not-so-young, the idea of long-term care can seem like it will never apply to you.
Maybe we’re just deluding ourselves that we’ll never get old or that these situations are someone else’s hardships.Whatever the case, we are only flesh and blood and long-term care is something about which we need to be realistic. Long-term care issues will face most Americans sometime during their lifetime and for some, it will be a longer period of time that will have a significant impact on their financial well-being. Whether it’s for yourself, your parent, or grandparent, you need to know what the potential costs are inherent to this type of stay and what you can do to meet the challenge.
Here is an overview of the challenges in dealing with long term care issues. For most Americans, when you reach 65 years of age, your primary health insurance carrier becomes Medicare, a government health care insurance program. Many people also purchase a Medicare supplement policy to help with co-pays, co-insurance and deductibles not covered by Medicare. What many people don’t realize is that a Medicare supplement policy for the most part does not cover anything that Medicare does not cover.
Medicare has very specific, detailed rules about what is covered, how much they will pay for what procedures, how long care can be provided, and on and on. In the health care world, these detailed rules are called Diagnosis Related Groups or DRGs. DRGs are the over four hundred government regulations for dealing with different medical conditions. These guidelines determine whether or not you meet the criteria for a specific illness, the proper course of action to treat that condition, and the appropriate stay permitted for patients.
Once you have reached the limits of what Medicare will cover for your hospital stay, if you are not well enough yet, the doctors and hospitals involved have no choice but to move you out of their facility because the money from Medicare will stop. Where they send you is to a “non-hospital” facility, which may go by many names, such as rehab center, long term convalescent center, nursing home, and such. Medicare will cover care in these facilities for roughly 100 days. After that, if you still need care, the care will have to be paid for out of your pocket because funds from Medicare and any Medicare supplement policy have stopped. The average stay in these can range from $4,000 to $6,000 a month or more, per person, depending on where in the country you are.
Depending on the length of time needed for long term care, the cost can be devastating to a family’s financial picture. In addition to the cost of long term care, there is the need to continue to meet household expenses and properly provide for the well spouse. As average lifespans continue to increase, we need to understand the options that are already available to us and the best practices for navigating them. You don’t need to know all of these rules but be aware that they are there and you should find an expert to help find a way to work within them.
Perhaps the most important lesson to learn about Medicare and long-term care is that it doesn’t cover you for much of a stay. Medicare will cover your care for a brief time, after that your costs are out of pocket. If you run out of money, then you can be eligible for Medicaid, the government’s health care program for the indigent. If this seems like a grim picture, don’t worry, there are steps you can take to ensure you are covered for long-term care. For more information, see my video on the subject: “Why Long-Term Care Should Be on Your Planning Agenda” : https://www.youtube.com/watch?v=F1P4o0os488
The opinions expressed in this commentary are those of the author and not necessarily the views of United Capital Financial Advisers, LLC. Certain statements contained within are forward-looking statements, including, but not limited to, predictions or indications of future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. United Capital does not warrant the accuracy or completeness of the information. The commentary is intended for information purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice.