Fact Versus Fiction on Financing Senior Care

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If you’re nearing or in your retirement years, chances are you’ve given some thought to what your care needs may be in the future and how you’ll pay for them. The trouble is there’s a lot of confusion around cost of care and what is or isn’t covered by your health insurance, Medicare and/or Medicaid. We can help by clearing up some of the most common misconceptions about financing senior care.

The Cost of Care

Over the past 15 years, the cost of long-term senior care services such as senior living and in-home care has steadily risen across the United States, according to the Genworth 2018 Cost of Care Survey.

The survey found these average monthly costs for long-term senior care:

  • Homemaker services – Help with household tasks that cannot be managed alone: $4,004
  • Home health aide services – “Hands-on” personal care, but not medical care: $4,195 24 hour care costs as much as $10-14,000, depending on where one lives.
  • Adult day health care – Social and support services in a community-based, protective setting: $1,560
  • Assisted living – A residential arrangement providing personal care and health services; Private, one-bedroom: $4,000
  • Nursing home care – Often a higher level of supervision and care than in assisted living with onsite nursing 24/7; also known as skilled care; Semi-private room: $7,441; Private room: $8,365

The Truth About Coverage

If you’re like most people, you probably aren’t sure whether you can afford those costs. It’s a good thing there’s health insurance, Medicare and Medicaid right? Well…

Fiction: Medicare covers all types of long-term senior care and for an indefinite time. 

Fact: Medicare only pays for long-term senior care if you require skilled services or rehabilitative care: 

  • In a nursing home for a maximum of 100 days, however, the average Medicare covered stay is much shorter (22 days).
  • You are receiving skilled home health or other skilled in-home services. Generally, long-term senior care services are provided only for a short period of time.
  • Medicare  does not pay for non-skilled assistance with Activities of Daily Living (ADL), which make up the majority of long-term senior care services. 

Fiction: Medicaid picks up where Medicare leaves off.

Fact: Medicaid does pay for the largest share of long-term senior care services, but to qualify, your income must be below a certain level and you must meet minimum state eligibility requirements based on the amount of assistance you need with ADL.

Fiction: If you have health insurance, you have more options for long-term senior care coverage.

Fact: Health Insurance through employers or private health insurance typically cover only the same kinds of limited services as Medicare. If they do cover long-term senior care, it is typically only for skilled, short-term, medically necessary care.

BONUS FACT: Some senior living communities reserve a percentage of their apartments for lower income individuals so it’s always good to check.

For more information, check out our Family Guide to Funding Senior Care & Housing!

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Other Options to Finance Senior Care

Don’t worry; even without the benefit of Medicare, Medicaid and/or health insurance, there are still options to help you offset the cost of senior care.

Veterans Aid & Attendance Benefit 

Wartime veterans or a surviving spouse with limited income may be eligible to receive a non-service connected pension (above the basic pension) to assist in paying for assisted living, home health care, adult day care or skilled nursing. 

Long-Term Care (LTC) Insurance

LTC insurance helps to pay for the cost of home care, adult day care, assisted living, memory care, skilled nursing and hospice by covering services typically not covered by health insurance, Medicare or Medicaid. Keep in mind that the older you are when you purchase the policy, the more expensive the premium might be. 

Life Insurance Conversion

Converting a life insurance policy into a Long-Term Care Benefit Plan is also an option. Anyone with an in-force life insurance policy can transform it into a pre-funded financial account that disburses a monthly benefit to help pay for long-term care needs such as home care, assisted living, skilled nursing and hospice. Unlike life insurance, this account is a Medicaid qualified asset.

While there’s no way to know for sure whether or not you’ll need senior care – although most do at some point – knowing what to expect financially can help you prepare and give you invaluable peace of mind.