While most boomers know about the stressful, costly and time-consuming nature of long-term care, whether it be in the home or in a nursing home, many do not have an accurate idea of the costs associated with that care. Nursing home costs in the greater Boston area can run up to $150,000 a year and in-home care options can be the more cost-effective solution.
According to the article, to cover the long-term costs of care for the aging, it would require a savings of about $200,000 by the age of 65 for those costs alone. With a savings of $130,000, there is only a 90% chance of being able to cover lifetime medical costs. And these numbers don’t even include the costs of housing or food!
For many families, family members step in to provide so-called “informal care.” But this costs both employers and employees dearly. In 2013, there were an estimated 37 billion uncompensated hours dedicated to the care of the elderly. That represented an estimated $470 billion and approximately $3 trillion in lost wages, pension and Social Security benefits. For employers, it represented between $17.1 and $33 billion in lost productivity.
For now, many families rely on Medicaid to cover the costs of care, while private long-term care insurance represents only a small portion. In fact, with premiums increasing and therefore growing out of reach for many families, the number of purchased policies decreased by about 65% between 2002 and 2012.
Medicaid spending on long-term care represented about $119 billion in 2014—only a quarter the amount spent by families themselves—and without proper planning, many would not even qualify for Medicaid, given the stringent requirements.
But some are looking for alternative solutions. The Long-Term Care Financing Collaborative & several other groups of experts have one possible solution: mandatory universal catastrophic insurance, funded by a dedicated tax. Proponents of the plan say such a plan could reduce out-of-pocket costs by approximately $130 billion & reduce Medicaid spending by $154 billion. However, especially in light of the fight over the Affordable Care Act, this is not a particularly popular concept on Capitol Hill.
Some states are not waiting for the federal government to act, however. Hawaii, Minnesota, Oregon and Washington are already conducting their own experiments. One major shift for these states is moving away from the more costly nursing homes to implement at-home care options, which have proven themselves more cost-effective. Supporters say that nursing homes were already draining people’s assets until they were forced to rely on Medicaid and that these programs may just minimize costs for both the taxpayer and the state.
These types of changes move incredibly slowly, however, and most proponents don’t anticipate any imminent implementation on a wide scale. For most, planning ahead and considering Medicaid planning as part of an overall estate plan can help significantly.
For more information on Medicaid planning as a part of your estate plan, explore our website and contact us to schedule your consultation today!
Reference: Next Avenue (May 24, 2016) “Pressure Will Grow to Change Long-Term Care Financing”