How Would You Pay for a Nursing Home?


The cost of long term care.


As we build for a bright future, planning for every eventuality is a sign we care for those closest to our hearts. Because any family could face the need for nursing home care without warning, it is vital to plan ahead to make the experience as positive as possible. The skyrocketing cost of long term care adds urgency to this task. Here are some key points to reflect on, and the basic choices available.


The Reality of Long Term Care


If you ever need nursing home care for yourself or a loved one, you might think your health insurance will cover it. Think again. While a brief nursing home stay may be paid for, don’t expect much else.


What does a long term stay in nursing home cost? The numbers are staggering.  Here are the approximate figures, based on a 2008 survey:


Cost of a nursing home stay.


In case you are wondering, these prices are not for buying the nursing home, just staying in it. A joke circling the internet these days suggests that since nursing home cost today compares to an upscale hotel, why not stay in the hotel instead? We can have room service, maid service, great amenities, and the whole experience will be more pleasant. In all seriousness, the annual bill either way is more than what most people earn in a year of work.  It’s simply unaffordable.


That's ridiculously expensive.The high and fast-rising cost of long term care is bankrupting many older and disabled people today. While state support for the needy is often the only choice possible, we need to know all the options and decide for ourselves.





Thinking About the Unthinkable


Are you confident you’ll never need nursing home care? You might. According to the statistics, once you reach age 65 there is a 70% chance you will require “long term care” at some point before you die. This could include home care by professionals or a stay in a nursing home. Both are very expensive.


Long term care is not just for old people, either. While about 63% of people receiving care are age 65 or above, the other 37% are younger! How can a younger person need long term care? Consider a few scenarios:


● On the way to the store later today, you are struck by a car

● Next week during a meeting, you suffer a stroke

● You begin having memory problems, and learn it is Alzheimer’s

● You undergo a routine operation, but there are complications

Any of these events could leave you partly incapacitated and put you in a nursing home for life. And here’s another sad truth: Even if you never need long term care yourself, a close family member might. It may be worth considering if you’re prepared to pay the bills.


The Imperfect Choices to Pay for Long Term Care


What choices do we have to pay for long term care?  Let’s consider six options. None of them are very attractive, some are unpleasant, and yet they’re the main alternatives available today.


Choice #1:  Pay with Your Savings


Long term care requires savings.

The clock is ticking. Have you started saving yet?

If you have enough assets, you may be able to pay for care yourself. As we’ve seen, this requires a certain amount of wealth. If you are young enough and on track for success, the best bet would be to set up a goal-oriented savings plan just for this purpose.  With luck, by the time you need care you will have money available to cover your expenses. Some insurance companies offer annuity investments that are specially designed to help pay for long term care.  Critical Tip: Some savings for long term care are important for everyone, since all payment options including Medicaid have a time delay before they fully kick in and cover the cost.


Choice #2:  Apply for State Care


Medicaid is a state welfare program partly funded by federal dollars. Every state has its own plan that provides long term care to those who can’t afford it. However, to qualify you need to be in poverty—i.e. you must spend down your assets on care until they are no more than $2,000. This means you must give up everything you own to use this option. You are also not allowed to pass your assets to someone else to protect them.  The only exception is a small allowance for your spouse.


If you were hoping to hide assets, you may be interested to learn the state can check five years into your past to make sure you are complying with this rule. If you own a home, Medicaid will demand payment from your estate after you die. In other words, if you have any assets you will lose them if you go this route. If you are single, this may be acceptable, but what if you are married? Giving up what you own would impoverish your spouse.


Choice #3:  Buy Long Term Care Insurance


If you are not yet in need of care, you may be able to afford long term care insurance to pay for a nursing home or home health care. Many employers offer group plans, or you could buy your own policy. At first, this seems like an ideal solution. However, this insurance is not cheap, and the most affordable plans available do not provide lifetime coverage. Here is the cost of two typical plans in 2008.


Long term care insurance is expensive.


Note that neither of these plans is inexpensive, yet both are quite limited. They pay for only three years of care. While three years is about the average stay in a nursing home, many people stay much longer. As you might expect, lifetime coverage is available, but at a much higher cost.  Both of these examples also require that you have excellent health at the time you buy coverage, and the first plan pays less than the average cost of a nursing home.


Long term care insurance makes it possible to save your assets, but it is expensive and  isn’t suited for everyone. For example, it doesn’t make sense if your income is insufficient and your policy requires you to continue to pay premiums even after you receive care (check with your agent to learn if this applies to you). You should also not consider it if you have few assets to protect, or no family to leave assets to, unless you want to stay in a better facility than the state could provide.  Note: There is a new way to combine insurance with state care that could allow you to keep more of your assets (Choice #4).


Choice #4:  Buy Insurance and Partner with the State


This is a great new option that is better than impoverishing your family to become a ward of the state. It is known as the partnership for long term care. Under this plan, you buy your own long term care insurance from a state approved company, and the insurance pays for the nursing home. However, when your insurance runs out, you can readily move to state Medicaid to continue receiving care, plus the state will let you keep some of your assets. How much of your net worth can you preserve with this plan? You can keep assets totaling all that your insurance policy has paid out + $2,000. For example, if your insurance has paid out its maximum coverage of $175,000, the state will allow you to keep $177,000 in personal assets.


When should you buy long term care insurance?

How soon should you buy insurance?

This plan makes good sense for a married couple that can afford a limited insurance policy for long term care. To find out if it is available in your state, check this website, or contact your state insurance commissioner.


Choice #5: Save Now to Afford Insurance Later


If you are still young, can’t afford insurance, or don’t have a lot of assets to protect, why not plan ahead to buy long term care insurance later?  You can do this by setting up a savings plan to help cover the insurance premiums once coverage makes more sense for you.


When is the right time to buy insurance? The average long term care insurance customer buys it at age 61, but you can save considerably if you buy it earlier. According to Consumer Reports, it may not make sense to buy it before you’re in your fifties.  However, if you have a family history of a life-threatening disease, you have sufficient funds to afford it, or it just makes you feel more confident, it may be worth buying at a younger age.


Choice #6:  Legal Asset Protection


If you plan far enough in advance and can afford an attorney, you may be able to protect assets for your spouse even if you personally need to go on state welfare. Only a qualified attorney can tell you for sure, but perhaps you could set up a trust for your spouse, or legally separate your estate. Remember though, states look up to five years in the past to make sure you are following the rules.


Paying for long term care is a tougher nut to crack than most of us imagine. The costs have now reached staggering levels, and are only projected to rise faster as baby boomers retire.


This is an issue well worth some serious reflection as you look to build a brighter future.


Useful links:


Long term care is not hard to understand if you have a guide to show you the ropes. Otherwise, it can be overwhelming. Here is some useful information.

A U.S. government website about long term care insurance.

A download-able guide and workbook from Kiplinger, rich with facts and figures.

An unusually informative website from a company that sells insurance.

The helpful website of the Family Caregiver Alliance.

Books available at

Long-Term Care: How to Plan & Pay for It – By Joseph Matthews
The Consumers’ Guide To Long Term Care Insurance – By Steven F. Rowley
The Money Doctor’s Guide to Taking Care of Yourself When No One Else Will [Kindle Edition] – By W. Neil Gallagher, PhD

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