Financial Insight: The Long Term Care Effect – Protecting Against Costs of Care

The cost to care for our elders is rising at an alarming rate, especially here in the North East. We can refer to it as the elephant in the room.{{more}}

Most people know they need to do something but they don’t know what to do or where to begin. Maybe your neighbor did one thing, and your brother-in-law did something completely different. What should you do?

Well, let’s start with the facts. According to a 2012 survey conducted by the MetLife Mature Market Institute, the cost of nursing home care in Connecticut averages $370 a day, with high end facilities costing as much as $470 a day, or more than $14,000 per month. The same survey found the average monthly cost for a Connecticut Assisted Living Facility to be $4,935. So who pays? In most cases, you do.

Medicare very rarely covers nursing home and assisted living situations.

If a patient is receiving “skilled services” in a nursing facility after a qualifying 3-day hospital stay, Medicare will help pay for up to 100 days of care.

So, what will happen? Individuals (and their families) who require long term care must look to other sources of payment, e.g., their own resources, long term care insurance, or Medicaid.

Medicaid is the joint state/federal program that pays for, among other things, convalescent care for eligible individuals. (Medicaid review conducted by Barnum in house lawyer) In Connecticut, in order to qualify, the total assets in a patient’s name cannot exceed $1,600.

If the individual has a spouse at home, he or she may keep half the couple’s assets, up to $115,920.

Some assets are exempt, such as the house, as long as the community spouse is living in it, life insurance with cash value under $1,500, an irrevocable funeral contract, and a car.

Note that qualified plans and IRAs are not exempt in CT, though they are in some states.

The average stay in a nursing home is about 32 months. $14,000 a month x 32 months is $448,000. Think about the financial impact of just an average stay and the adverse effects it could have on your retirement nest egg.

Next Issue: What you can do to protect yourself and family.