Archive for the ‘Paying For Care’ Category

Background

Like most issues about which I post, the topic of “Finding A Good Death” arose from a personal connection. In this case when a neighbor consulted me about his sister who was being referred to hospice care after battling cancer.  While not an expert in hospice care, I have long studied seniors housing and care and, for a time, I followed the publicly traded hospice companies as a stock analyst.  I also have some personal experience with hospice care.  My older brother (only four years my senior) utilized hospice care before his death in late 2014 from a degenerative neurological condition. To supplement my own knowledge for this blog post, I interviewed a friend and neighbor who is a long-time bereavement counselor volunteer at a large not-for-profit hospice in Baltimore and researched the topic on line.

John McCain’s death, which appeared to come quickly surrounded by friends and family after the Senator elected hospice care, also makes the subject of Finding A Good Death very relevant.

Even though we all die eventually, talking about death and planning for death, beyond making funeral arrangements, are taboo subjects for most Americans. We are culturally geared to want to live as long as possible and most physicians and patients have a strong bias toward utilizing the most expensive, invasive and technologically advanced medical procedures to prolong life, viewing death as failure rather than an inevitable part of the life cycle.

According to data from the Social Security Administration:

  • A man age 65 today can expect to live, on average, until age 84.3.
  • A woman age 65 today can expect to live, on average, until age 86.7.

About one out of every four 65-year-olds today will live past age 90, one out of 10 will live past age 95; and longevity estimates for 65 year olds continue to rise.   Also, these statistics are averages for the entire population, so healthy non-smokers and those with better health plans and medical care should expect to live longer. Once you reach 65, I would argue you already have a very good chance of living a long life and you and your family should be more concerned with the quality rather than quantity of the remaining life you lead, and with the quality of your death, the focus of this post.

A good death is generally understood to be one that comes quickly and peacefully and with minimal pain and suffering, ideally at home and with an opportunity for loved ones to say their goodbyes.

Understanding Hospice

English physician Dame Cicely Saunders first applied the term “hospice” to specialized care for dying patients in the UK in 1948. Hospice care was introduced to the U.S, in the mid-60s and did not become a Medicare eligible benefit until 1982. History of hospice care

As defined by Medicare, hospice is a program of care and support for people who are terminally ill (with a life expectancy of 6 months or less if the illness runs its normal course) and their families. Hospice helps people who are terminally ill live comfortably.

  • The focus is on comfort (palliative care), not on curing an illness.
  • A specially trained team of professionals and caregivers provide care for the “whole person,” including physical, emotional, social, and spiritual needs.
  • Services typically include physical care, counseling, medications for relief of pain and suffering, medical equipment, and supplies for the terminal illness and related conditions. Things like diapers are not covered by Medicare although catheters are.  Patients and their families should not expect 24/7 physical care from hospice unless the patient is receiving inpatient care.  Home health aides can be provided for bathing, etc. but cannot provide total care.
  • Care is generally given in the home.
  • Family caregivers can get support.

In order to qualify for Medicare’s hospice benefit, you must participate in Medicare Part A and

  • Your hospice doctor and your regular doctor (if you have one) certify that you’re terminally ill (you’re expected to live 6 months or less).
  • You accept palliative care (for comfort) instead of care to cure your illness.
  • You sign a statement choosing hospice care instead of other Medicare-covered treatments for your terminal illness and related conditions.

Medicare will cover the cost of a one-time hospice consultation even if you decide not to elect hospice care.   Once you elect hospice care, the first step in the process is development of an individualized care plan. Original Medicare will cover everything you need related to your terminal illness, but the care you get must be from a Medicare-approved hospice provider.

Hospice care is usually given in your home, but it also may be covered in a senior housing community, a nursing home or a specialized hospice inpatient facility. Depending on your terminal illness and related conditions, the plan of care your hospice team creates can include any or all of these services:

  • Doctor services
  • Nursing care
  • Medical equipment (like wheelchairs or walkers)
  • Medical supplies (like bandages and catheters)
  • Prescription drugs
  • Hospice aide and limited homemaker services. At Gilchrist, a large not-for-profit Baltimore area hospice, a volunteer may do light housekeeping but that is all
  • Physical and occupational therapy
  • Speech-language pathology services
  • Social worker services
  • Dietary counseling
  • Grief and loss counseling for you and your family
  • Short-term inpatient care (for pain and symptom management)
  • Short-term respite care
  • Any other Medicare-covered services needed to manage your terminal illness and related conditions, as recommended by your hospice team.

Note that the above list does not include the cost of room and board in a seniors housing or skilled nursing facility, so the patient or their family may have to cover this cost if routine hospice care cannot be provided at home.

If your usual caregiver (a family member or other caregiver) needs rest, a hospice patient can get inpatient respite care in a Medicare-approved facility (such as a hospice inpatient facility, hospital, or nursing home). Your hospice provider will arrange this for you. You can stay up to 5 days each time you get respite care. You can get respite care more than once, but only on an occasional basis.

Medicare pays the hospice provider for your hospice care.  There’s no deductible. You’ll pay:

  • Your monthly Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance) premiums.
  • A copayment of up to $5 per prescription for outpatient prescription drugs for pain and symptom management.
  • 5% of the Medicare-approved amount for inpatient respite care if used.

Medicare won’t cover any of these once your hospice benefit starts:

  • Treatment intended to cure your terminal illness and/or related conditions. Talk with your doctor if you’re thinking about getting treatment to cure your illness. You always have the right to stop hospice care at any time.
  • Prescription drugs (except for symptom control or pain relief).
  • Care from any provider that wasn’t set up by the hospice medical team. You must get hospice care from the hospice provider you chose. All care that you get for your terminal illness and related conditions must be given by or arranged by the hospice team. You can’t get the same type of hospice care from a different hospice, unless you change your hospice provider. However, you can still see your regular doctor or nurse practitioner if you’ve chosen him or her to be the attending medical professional who helps supervise your hospice care.
  • Room and board. Medicare doesn’t cover room and board. However, if the hospice team determines that you need short-term inpatient or respite care services that they arrange, Medicare will cover your stay in the facility. You may have to pay a small copayment for the respite stay.
  • Care you get as a hospital outpatient (such as in an emergency room), care you get as a hospital inpatient, or ambulance transportation, unless it’s either arranged by your hospice team or is unrelated to your terminal illness and related condition.

The Medicare hospice benefit is paid by original fee-for-service Medicare.   To understand how the hospice benefit relates to Medicare Advantage plan, Part B or D coverage speak with Medicare or your hospice provider and you might consult the publication Medicare Hospice Benefits – Medicare Hospice Benefits

A Popular Benefit

Hospice care enjoys wide support from patients and patient advocates who are supportive of patients dying with dignity and having control over the final chapter of their lives.  It is supported by policy makers who believe hospice can save Medicare funds by having terminally ill patients avoid expensive procedures at the end of life that often provide little lasting benefit.  Mean medical spending during the last 12 months of life is reaching $80,000 in the U.S., with 44.2% spending for hospital care (57.6% is hospital spending during the final three months of life).   To the extent hospice care can reduce expensive end of life hospital care it has the potential to reduce growth in Medicare spending. Hospice Impact On Medical Spending

Hospice care is also viewed favorably by investors and for-profit healthcare companies who see it offering stable reimbursement, attractive margins and very attractive growth prospects as Baby Boomers age.   Because hospice reimbursement is designed to adequately fund small not-for-profit hospice providers, not-for-profit and for-profit operators with scale can generate an excess revenue/profits from spreading their overhead costs over a large number of patients, thereby generating reasonable margins from hospice reimbursement.

Electing Hospice Care

The key issue for patients and their families in electing hospice care is that doing so requires you to forgo additional curative treatment for the condition that is expected to lead to your death in order to receive funding for palliative care designed to give you a dignified death with minimal pain and suffering. As noted above, In order to qualify for hospice care a physician, typically your primary care doctor or a hospice doctor, certifies that you are expected to live no more than six months if your disease follows its typical progression.  With this physician’s certification and your election to shift from curative to hospice/palliative care you will qualify for Medicare hospice benefits or hospice benefits from a private insurer.  If you live more than six months in hospice care, the hospice benefit can be extended but Medicare manages this by penalizing operators that have average length of stays in hospice care.

Selecting A Hospice Provider

According to the National Hospice and Palliative Care Organization (NHPCO) Medicare paid about 4,200 different hospice providers for services in 2015. About 60% of these hospice providers were profit-making companies and 40% are not-for-profit (Long-Term Care Providers and Services Users in the United States: Data From the National Study of Long-Term Care Providers, 2013–2014 Department of Health and Human Services, Centers for Disease Control, Center for Health Statistics, February 2016 – CDC Report On Hospice Services

Hospice providers served approximately 1.3 million patients in 2013 with an average length of stay of 23 days – indicating an average daily census of about 14 patients per hospice.

The statistics above suggest two criteria for selecting a hospice provider 1) for-profit vs. not-for-profit and size.  Many hospice providers are small not- for-profit operations.   For-profit companies tend to be larger in size, as are some well established not-for-profit organizations, such as Gilchrist Hospice in Baltimore.    Smaller operations may offer more personalized care options but larger operations may have their own specially designed dedicated inpatient hospice units and greater resources to Invest in family grief counseling, for example.

Your physician or a social worker/discharge planner at a hospital should be able to recommend or refer you to one or more hospice providers.  A simple online search on “finding a hospice provider” results in links to larger for-profit and not-for-profit providers in your area (Heartland, Amedysis and Gilchrist in Baltimore) and links to referral services, such as A Place for Mom, an Internet focused senior housing and care referral company, and the National Hospice and Palliative Care Organization (NHPCO). Keep in mind that referral services will only refer you to organizations that are members of that organization or agree to pay a referral fee.

The Medicare.gov/hospice compare website provides ratings for hospice providers with percentage scores for a number of objective and subjective measures including results from user surveys.  The site allows you to search for specific providers and provides near particular zip codes. See Medicare Hospice Compare.   Some of this data is likely self-reported but still appears useful for comparing providers.

Before committing to a particular hospice provider a prospective patient and their family should ideally meet with the provider to assess the staff who will oversee and deliver care to your loved one, share information about your family’s situation and discuss options for delivering hospice care in a way that best meets your families needs.   Care will most likely be delivered at home with family members engaged in the hospice care delivery process.  It can also be provided in a seniors housing or skilled nursing facility but this may require the family to pay for the coast of board. If required, typically right at the end of life when 24/7 oversight is needed, the location of care may be shifted to an inpatient hospice care facility and you should understand when and how such a facility might be used.   You may wish to check on the location and quality of the inpatient option.

I welcome comments and questions on this blog and hope it aids you finding a good death for you and your loved ones.

 

 

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Immigration and Senior Caregiving Linked

It has been several months since I updated my blog because I have gotten busy serving on the Board of Quality Care Properties (QCP) and with some consulting work.   I am also just back from a vacation in Costa Rica about which I hope to soon  do a post.

An article in today’s (January 23, 2018) Wall Street Journal prompted me to do this post.  The WSJ article is entitled  “How Immigration Could Affect Grandma’s Care”  and is in the “Capital Journal” commentary by Gerald F. Seib.  Key points include:

  • American is getting older.  A fifth of the population will be over 65 by 2050 and 4% will be over 85, both records in terms of absolute numbers and as a percentage of the population.
  • A study by PHI, an organization that works with the long term care and home care industry, estimates there are 860,000 immigrants holding “direct care” giving jobs in senior care and perhaps as many as one million when workers providing care independently for families are included.
  • The largest share of these workers come from Mexico, the Philippines, Jamaica, Haiti and the Dominican Republic; the very countries in the crosshairs of the immigration debate.
  • Restrictions on immigration may drive up wages for what are often low paying jobs providing direct care to seniors and this may draw more people into the industry.
  • But forcing dedicated, qualified people from other countries to leave, many of who have lived in the U.S. for years, will be a blow to many including seniors who rely on these immigrants for care.

As you consider you position on immigration policy, you should also consider who will care for your parents and eventually yourself and your peers as you age.

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EXECUTIVE SUMMARY

Most seniors and their families see the monthly cost of a senior housing facility as much higher than the monthly cost of living at home with family care, or even with part-time or full-time home healthcare.   But the math that most seniors and families use to make this comparison assumes no implied cost for occupying a home without a mortgage, much less paid care than is provided in a seniors housing facility and places no value on the companionship and social interaction that a seniors housing community can provide.

This analysis, using data from a variety of sources, attempts to make a fair apples-to-apples comparison, before and after taxes, of the cost for a senior living at-home without care, living at-home with a modest amount of paid care and living in an independent living, assisted living or memory care facility.

The chart below shows the comparison on a pre-tax basis of living at home with a modest level of care to the cost of various types of seniors housing communities.   Bottom Line – The cost of living in a $150,000 home with even a modest level of home healthcare can easily exceed the cost of an independent living community and approaches the cost of assisted living.  In addition, a senior living at home with part-time care does not get the companionship and social interaction that a seniors housing community can provide and which many studies show are beneficial for a senior’s mental acuity and well being.

Please read below for details and I welcome your comments and questions.

 

THE COST OF A SENIOR HOUSING COMMUNITY

The cost of various seniors housing settings is easy for seniors and their families to see because most facilities charge a monthly fee for housing and care.   The average monthly cost for this care according to a recent survey by the National Investment Center for the Senior Housing and Care Industry (NIC) is as follows:

  • Independent Living – $3,076 per month
  • Assisted Living – $4,722 per month
  • Memory Care – $6,082 per month

To these costs, we need to add some additional expenses for a senior living in a seniors housing community for social and entertainment activities, transportation and non-housing living expenses.   I have estimated these at half the estimated cost of someone living at home based on data from the “A Place for Mom.com” website, at a total of $475 per month.  I assume half the cost of a senior living at home for someone living in seniors housing because many of these services are provided in a typical seniors housing facility and are included in the monthly rate. I add another $183 per month for a senior living in a seniors housing community for utilities, cable television, wifi and phone and renters insurance. Adding a combined $658 per month for things like phone, cable TV, some outside meals, transportation and other living expenses to the monthly fee for seniors housing communities brings the total monthly cost for living in senior housing rounded to the nearest $100 to:

  • Independent Living – $3,700 per month
  • Assisted Living – $5,400 per month
  • Memory Care – $6,700 per month

 

AT HOME LIVING AND HOME OPERATING COSTS

When the total monthly cost for senior housing and care at the above settings are compared to the out-of-pocket costs for a senior living in a $150,000 home without a mortgage they certainly appear formidable.     A Place for Mom estimates the monthly out-of-pocket cost for a average senior living at home (in a home we assume is worth about $150,000) without a mortgage to be approximately $2,400, broken down as follows.

Maintenance costs $272
Utilities including phone and cable $265
Property Taxes $149
Property Insurance $78
Three meals per day $494
Housekeeping services $118
Emergency alarm system $50
Transportation $715
Social and entertainment $235

It is this $2,400 figure (or something lower because the senior in question has curtailed her social, entertainment and transportation expenses) that most seniors and their families compare to the $3,700 to $6,700 monthly cost of facility-based senior housing and care.   Therefore, seniors and their families generally see facility-based care as 50% to 275% more expensive than having a senior live at home.

But the above comparison ignores the value of the house in which a senior is living and ignores the cost of caregiving and the socialization benefits that a senior would receive if she were living in a seniors housing facility.   Let’s deal with each of these separately.

 

ESTIMATED HOUSING COSTS FOR $150,000 HOME

To account for the value of the home itself, I estimate implied rent (essentially an estimate of the amount you could earn from renting the house) using a 7% cap rate on the assumed $150,000 value of the home, at $875 per month ($150,000 x .07 / 12), which seems very modest for many U.S. housing markets.

When you combine the above monthly costs for home maintenance, taxes and operation and living expenses of $2,400 per month with the implied rent, we get an estimated monthly housing and living cost for a senior living in a $150,000 home of $3,275 (approximately $2,400 for living and home operational expenses, plus $875 in implied rent).

From the above analysis you can see that the cost of living expenses, home maintenance and operation and implied rent/housing costs for a senior living on one’s own $150,000 home, calculated in what I believe is a conservative fashion, is nearly 90% of the average cost of a senior living in an independent living facility.   And in the independent living facility the senior is getting much more interaction with other people, much more socialization and mental stimulation than most seniors get when living at home alone.

 

ESTIMATED HOUSING COSTS FOR $500,000 CONDOMINIUM

Doing the same math for a senior living in a $500,000 condominium yields estimated monthly living and home operating expenses of $4,449 broken down as follows:

Condo Fees $2,000
Maintenance costs
Utilities including phone and cable $165
Property Taxes $542
Property Insurance $130
Three meals per day $494
Housekeeping services $118
Emergency alarm system $50
Transportation $715
Social and entertainment $235

The implied rent calculation for a $500,000 condo is $2,917 per month ($500,000 x 7% / 12). Combining monthly living and home operating expenses with the implied rent for a $500,000 condo indicates a total monthly cost of living at home, including implied rent, without care at approximately $7,400.

When the above figure is compared to the cost of seniors housing, you can see that the estimated monthly cost of a senior living in a $500,000 condo is almost twice the cost of independent living and 36% higher than the cost of assisted living. You can argue that comparing the cost of a $500,000 condo with the average cost of seniors housing is an unfair comparison because these facilities would cost more in an expensive real estate market. But I believe the calculation on a $500,000 condo is fair for the Baltimore market, where I Iive, and I believe it is fair to say that when a true apples-to-apples comparison of housing, home operation and living costs for senior is made to the cost of living in a seniors housing facility, the difference is smaller than most seniors and families realize before even taking into account the cost of care.

 

HOME CARE COSTS

From the above analysis, we see that the cost of a senior remaining at home is less than the cost of any type of seniors housing community, even independent living, for a senior in a modest $150,000 home.   However, as soon as any degree of paid home healthcare is provided the cost advantages of living at home disappear.

According to A Place For Mom and other surveys conducted by insurance companies offering long term care insurance, the cost of in-home care ranges from $14 – $24 per hour.   Certainly at the lower end of this range we are talking about a companion or an aid, not a trained nursing. If you assume only four hours of care per day and only five days per week with family providing care on weekend, the monthly cost of this much home healthcare would range from $1,120 ($14 x 4 hours x 5 days x 4 weeks) to $1,920 per month ($24 x 4 hours x 5 days x 4 weeks).   If we use the average of these two figures, the monthly cost for four hours of home healthcare five days a week is $1,520.

When you add the cost of four hours of home care during the week to the cost of housing noted above, the monthly cost of housing plus a modest level of home health would be approximately:

$150,000 Home $4,800
$500,000 Condo $8,900

No cost is assumed for family care on weekends.

As the chart at the beginning of this post indicates, as soon as a modest level of home care, in this case four hours per day five days a week, is added to the cost of a home, home operation and living expenses, the cost of living at home with home care, even for a modestly priced home, easily exceeds the cost of independent living and is nearly 90% of the cost of an assisted living facility.

 

TAX CONSIDERATIONS

In general terms, healthcare costs exceeding 7.5% of income of a senior’s income are deductible. This includes long term care costs if the senior is chronically ill and is is being cared for pursuant to a plan of care prescribed by a licensed health care practitioner.

If a family member younger than age 65 is paying for care, healthcare costs exceeding 10% of the income of the family member paying for care are deductible.   This can apply to home care prescribed by a licensed health care practitioner but not a senior’s housing costs while living at home.

In a seniors housing facility the cost of healthcare provided in assisted living or a memory care facility that exceeds 7.5% of income may be deductible if required by a senior’s medical condition and it is possible that the full cost of facility-based care including housing component may be deductible if living in such a facility is considered essential for medical reasons.   See IRS Publication 502 https://www.irs.gov/publications/p502/ar02.html for more information and consult with an accounting professional for more complete information.

 

AVAILABILITY OF GOVERNMENT ASSISTANCE

While many people believe it does, Medicare does not pay for long-term custodial care at home or in a seniors housing facility.   It may pay for short-term home health, therapy or nursing care at-home or in a facility if is prescribed by a physician in response to a particular medical need.

Medicaid will pay for long-term custodial care in skilled nursing facility but only after all other resources are exhausted.   Some states have waiver programs that allow Medicaid to be used for assisted living and memory care or at-home community-based care, but as is the case with nursing home care, Medicaid will pay only after all other resources are exhausted. In addition, the last proposed Republican repeal and replace of the Affordable Care Act included significant cuts to Medicaid that could potentially reduce the availability of Medicaid funds for long term care for seniors.

Veteran’s benefits include increased Veteran’s Aids and Attendance Pensions payment for care in a seniors housing or long term care facility under certain circumstances and seniors who qualify for Veteran’s benefits should investigate this option.

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The Cost of Care

Raw Cost of Care

The chart below shows the average monthly cost of care for skilled nursing (nursing home), memory care (dementia), assisted living and independent living facilities in the Baltimore/Washington region for 2015.    It also shows the cost for 24 hour / 7 day a week home health aide care and 24/7 home health aide care supplemented by 7 hours each week of registered nursing (RN) and licensed practical nursing (LPN) care in an attempt to replicate the level of care an individual might receive in an assisted living or skilled nursing facility.  cost-of-care

The monthly cost in 2015 of facility-based care in the Baltimore/Washington region ranges from $2,912 in an independent living facility to $5,659 in a one bedroom unit in an assisted living facility to $6,234 in a memory care facility, and $9,990 to $11,270 for care in a skilled nursing facility (nursing home) in either a semi-private or private room.   For a resident needing assistance with three or more activities of daily living (bathing, transferring, etc.), or with any significant degree of dementia, an independently living facility would probably not provide adequate care without supplemental home healthcare, so the effective range for the monthly cost of care for a senior needing a moderate to significant level of assistance in a specialized seniors housing and care facility in the Baltimore/Washington region in 2015 was $5,659 to $11,270.

To see description of the various types of senior housing and care facilities see my page Senior Housing Options http://wp.me/P64zBK-w.

Home health aides cost $21.73 per hour in 2015, and would cost $14,603 monthly if provided on a 24/7 basis assuming no differential for night shifts.   A licensed practical nurse was $53.94 per hour and a registered nursing was $77.88 per hour.   In the above example, I assumed an hour a day of both LPN and RN care in addition to 24/7 home health aide care to estimate the monthly cost of care equivalent to that delivered in a skilled nursing facility to be approximately $18,294 per month.   Many families care for seniors with a combination of care by family members supplemented with limited time by home health aides or other paid caregivers.   While this type of arrangement can result in lower cost than facility-based care, it is clear that the cost to provide 24/7 aid and nursing care at home far exceeds the cost of obtaining such care in an assisted living, memory care or skilled nursing facility.    Even when less than 24/7 paid care is provided the cost of facility-based vs. home care is often closer than families expect once the cost of utilies,  home upkeep and forgone rent or sales proceeds are considered.

The other big advantage to facility-based care over 24/7 home care, even if you can afford it, that I believe many families overlook, is socialization.   Seniors being treated at home, even by the most dedicated family caregivers and aides, spend a lot of time isolated from human interaction.   At well-run senior housing and care facilities, interaction among the residents and between residents a diverse group of staff provide more interpersonal and intellectual interaction and stimulation than can be achieved at home, which can be very important for a seniors’ mental health and emotional well being.

Planning For The Future Cost of Care

If the raw cost of care and learning that the government will not help you pay for it (See prior post “The Government Will Not Pay For You Long Term Care”) are not sobering enough, seniors and families trying to plan for long term care need to understand the probability of needing such care, the likely duration of such care, and its future cost.   I hope to explore these issues more fully in a future post on long term care insurance and other financing options.  But to illustrate the future cost of care for planning purposes here, I have assumed an average length of stay (LOS) for skilled nursing and assisted living  care of 24 month, 36 months in memory care and 39 months in independent living.  I have then assumed 2.5% inflation for 35 years because the average entry age in to an assisted living or skilled nursing facility is about 85 and the time many people start seriously considering long term care insurance is age 50.

future-cost-of-care

In the table above, the average monthly costs for 2015 in the Baltimore/Washington Region are mutiplied by an assumed LOS in months to get the cost for an expected episode of care.    The future value of this expected episode of care is then calculated for 2050 assuming you are thinking about this today at age 50 and planning for costs when you are 85 and are more likely to enter an assisted living or skilled nursing facility.   The LOS assumed above are averages and at two years probably a bit high for long-stay custodial skilled nursing care.  The average LOS are about right for assisted living and independent living based on actual turnover rates in buildings today.    I did not find good data on memory care facility LOS but it is widely recognized to be higher than assisted living because some residents enter at younger ages with early onset Alzheimers and are in better physical condition.   When planning for an individual’s need to finance long term care it may be appropriate to plan for longer or shorter lengths of stays and look at the probabities of  these  but I believe  these averages are useful to illustrate the order of magnitude of possible future long term care costs.

I assume 2.5% inflation to estimate the future cost of long term care.   The 2.5% inflation factor is about where costs have been increasing in recent years but with increasing wage pressure and inflation expectations higher now that Donald Trump is President-elect, other higher inflation assumptions may be appropriate.

The bottom line is that a 50 year old today might reasonably plan for between $300,000 and $600,000 of long term care costs (an average of $516,483 for AL through private room skilled nursing) and expected to spend this amount over a two – three year period beginning around 2050.

Technical Notes

New York Life, which is a long term care insurance provider affiliated with AARP, has an online cost of care calculator that is updated annually.   New York Life’s 2015 Cost of Care Survey was designed and implemented by Long-Term Care Group (LTCG), the nation’s leader in long-term care administration services. Each year LTCG surveys thousands of Skilled Nursing Home, Home Health Care and Assisted Living Facility providers to collect cost of care data. The cost of care averages are calculated from over 30,000 different providers at the national, state and metropolitan statistical area level.   Other cost of care calculators, including one from Genworth Financial, are also available online.

The figures above are for the Washington / Baltimore Region and are somewhat higher than the national average.   I supplemented and verified the LTCG survey data with information from the National Investment Center for the Seniors Housing and Care Industry’s NIC-MAP database, which surveys seniors housing and nursing care properties on a quarterly basis (see http://www.nic.org).   I used NIC-MAP data for the Baltimore region, which shows the cost for skilled nursing facility care and care in an assisted living facility 7% – 8% lower than the LTCG survey but similar enough to confirm the LTCG survey data.    NIC-MAP is also able to provide pricing data for independent living and memory care / dementia facilities, which I incorporated in my analysis.

 

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The Government Will Not Pay For Your Long Term Care

Too many middle and upper income consumers still believe that Medicare, Medicaid or some other government program will pay for their long term care or the long term care of other elderly family members.

Medicare, the Federal healthcare program for those age 65 and over, pays for hospital care (Part A), physician care (Part B) and prescription drugs (Part D) and is often combined with private Medicare supplemental insurance to help cover copays. Some consumers opt for a Medicare Advantage (MA) /managed care plan (Part C) in lieu of Fee for Service Medicare that combines A, B and D benefits and may add other benefits in exchange for a restricted network of providers. Medicare will cover home health care or care in a skilled nursing or other post-acute care facility but only after a three-day inpatient hospital visit (observation status doesn’t count). While some MA plans may waive the mandatory 3-day hospital visit and provide home health or skilled nursing care to avoid a hospital stay, Medicare only pays for home health or skilled nursing care on a short-term basis to avoid or recover from an inpatient hospital visit. The basic Medicare Fee For Service benefit for skilled nursing care is for a maximum of 100 days in a given year only after a 3-day inpatient hospital stay, with only 20 days fully funded and the remainder with a 20% co-pay and only as long as the patient is progressing toward recovery. Long term custodial care for a senior who needs assistance with the activities of daily living, at home or in a facility, is not covered by Medicare.

Under the Medicare hospice benefit, Medicare will provide comprehensive palliative care but only for those (1) whose hospice doctor and regular doctor (if you have one) certify that you’re terminally ill (with a life expectancy of 6 months or less) (2) accept palliative care (for comfort) instead of care to cure their illness and (3) who sign a statement choosing hospice care instead of other Medicare-covered treatments for your terminal illness and related conditions.   Hospice care is provided under the Medicare Fee for Service Part A even if you are a member of a MA plan.    The Medicare hospice benefit offer comprehensive in-home or in-institution care for those expected to live six months or less.  It is an extremely valuable, and still somewhat underused, benefit but it does not provide long term custodial care.

Medicaid, the joint Federal / State program that pays for medical care for the poor will pay for long term care in a skilled nursing facility or in a home and community based setting, which in some states includes assisted living facilities. However, there are strict income and asset tests for Medicaid, which in Maryland are an individual income of approximately $12,000 or less ($16,000 or less for a couple) and assets of no more than $4,000, $6,000 for a couple. A spouse is generally allowed to exclude a home from the asset test and his/her retirement savings but all joint savings and investments would have to be spent down to at least $6,000 before Medicaid benefits can be used and states have become increasingly good about looking back at least three years to see that assets have not been distributed to other family members to meet the asset test. These tests effectively exclude middle and upper income individuals and families from using Medicaid for long term care without first exhausting the large majority of their savings. Medicaid may also limit which facilities and programs you can use since not all assisted living facilities or home health agencies accept Medicaid patients.

With this post, I hope to kick of a series of posts on the issue of Paying for Care that will provide information on the cost of care and strategies for funding it through savings or long term care insurance.

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