The evolution of long-term care
If you’re facing aging parents who might need care or are planning for your own care, then you may be struggling to find options. The U.S. Baby Boom generation is undersupplied with care facilities and staff and it’s reflected in the increasing cost of skilled nursing care. The national median cost is $100,000/year^1.
Long-term care, or assisted living, is generally required for anyone who needs help with eating, bathing, getting dressed, toileting, transferring, or continence. By 2030 there will be over 61 million people over the age of 66 and as people live longer, 70% of them will need care^1. Depending on what stage you are in your planning life, there are a few options to consider as you prepare for a long-term care event.
Self-fund: Most Americans will face the cost themselves, out-of-pocket, once the event occurs. This is the highest cost possible and puts their retirement at risk as savings and investments could be depleted sooner than expected. Qualified medical expenses are deductible above 7.5% of your adjusted gross income, however, this increases to 10% in 2019^2. Deductibility is less likely since the doubling of the standard deduction this year. Those with an annuity could receive tax-free treatment on distributions toward long-term care, depending on the annuity and strategy.
Medicare/Medicaid: Medicare pays for a hundred days of hospital stay but no more. Long-term care can last years and it would not be covered by Medicare. Medicaid, if you qualify, might fund facility care, however, typically you do not get to choose where they put you and there’s risk of receiving low-quality care.
Long-term care insurance: The younger you are, the lower the premium will be if you're eligible to get this insurance. John Hancock and Metlife, two of the largest insurance providers, closed their doors to new issuance and Genworth raised premiums. The marketplace or long-term care insurance is getting smaller and they are rejecting more applications than ever.
The market will continue to evolve to meeting this growing demand. More people are moving overseas to get care. For example, in Mexico, there are assisted living facilities that cost about $33 a day for all-in, round-the-clock care^3. Another example might be community-based care. More communities are popping up around the country providing the mutual support that’s needed by those who need care.
At Eureka Wealth Management, I help you prepare for that conversation with an aging parent and help research and offer solutions to the long-term care problem. I analyze and broker long-term care insurance and help project the cost of self-funding care. I also create retirement income and estate planning strategies. Call for a free first consultation at (760) 537-0791 or visit eurekawealthmanagement.com.
^2: https://turbotax.intuit.com/tax-tips/health-care/can-i-claim-medical-expenses-on-my-taxes/L1htkVqq9
Additional resources: https://www.medicare.gov/nursinghomecompare/Resources/Nursing-Home-Alternatives.html