Should You Be Planning for Long Term Care?

“…I have always found that plans are useless, but planning is indispensable.”

-Dwight Eisenhower

For most of us life rarely works out according to a plan. As an old proverb states, “man plans, God laughs”. We still make plans for future events which matter to us because experience teaches us that it makes sense to do so and because we anticipate, or at least hope, that planning will lengthen the odds of a successful or happy outcome.

Most of us, however, will give little thought to planning for a time when we may no longer be able to care for ourselves. There may be any one of several reasons that we avoid such planning; including that it is practically impossible to predict with any degree of certainty if we will ever need such care and, if so, when. Yet for those of us who are middle aged and older, planning for the possibility of long-term care definitely merits some thought, whether for a family member or for ourselves.

Consider the following statistics taken from a study conducted by the Center for Retirement Research (CRR) at Boston College[1]:

At age 65 and over, 44% of all men and 58% of all women will require some nursing home care during their lives
The average duration of nursing home care is 0.85 years for men, and 1.37 years for women
The average annual cost of a semi-private room in a nursing home is $81,030.00
Average cost of home health care is $21.00 per hour

As these statistics make clear, long-term care is expensive and there is a substantial likelihood of needing some such care after age 65. Although long-term care insurance is available in the marketplace, the CRR study found that only 13% of single individuals over age 65 choose to purchase such insurance. Most of those policies are purchased by couples but, ironically, 75% of all nursing home residents are single individuals. In short, those individuals who are most likely to need such care, and stand to benefit from long-term care insurance, choose not to insure the risk.

To the extent they think about it at all, these individuals may be deciding to forego purchasing long-term care insurance on the assumption that Medicare or Medicaid will pay for their long-term care. Although Medicare does provide coverage for a person needing care, its coverage is for a limited duration (up to 100 days in a skilled nursing facility). By contrast, Medicaid does pay for extended long-term care, but eligibility is limited to those whose monthly incomes and available financial assets fall below certain threshold levels. In some cases, depending on their level of financial assets, the potential Medicaid recipient may be required to “spend down” his or her assets in order to qualify for the program. Medicaid planning can become quite complicated when, for example, the Medicaid applicant is married and their spouse is still healthy enough to live independently.

Those who are comparatively better off financially may be able to pay for long-term care by means other than insurance or Medicaid. Alternatives may include personal savings or investments, selling a home, or obtaining a reverse mortgage. Choosing among the available options will require careful consideration of one’s own particular situation, including such factors as their health condition and medical prognosis (i.e., need for long-term care), personal income and level of financial assets, and the availability and ability of a spouse or other family member to provide care. Prudent planning may require a consultation with knowledgeable legal counsel.

In short, if you are 65 or older there is a good chance that you will require some period of long-term care in the future. Even if the need for such care is not imminent, thoughtful consideration of what may lie ahead might prove indispensable later on.

[1] Friedberg, Hou, Sun and Webb, Long-Term Care: How Big a Risk?, November 2014, Number 14-18, CRR.

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