Tips on Preparing for Long-Term Health Costs


What do you imagine for your golden years? Are you hoping you’ll be in good health, living in your own home, and enjoying life to the full? 

Unfortunately, this idyllic scenario is not likely to happen. According to the US Department of Health and Human Services, an average of 70% of 65-year-olds will eventually need some kind of long-term care. In addition, they estimate that 20% will need that long-term care for five years or more. 

What this means for you now is that you need to prepare financially before you retire. Essentially, you need to start by exploring your options. For example, look into ALTCS eligibility, long-term care options, and explore the possible costs.

Let’s take a closer look at some of the things you must consider when planning for the financial burden of long-term care. 

Know Your Options

People’s idea of long-term care varies considerably. What is available in terms of long-term care is equally varied. 

The general definition of long-term care is a service someone may need to help them with their basic, daily activities, or rehabilitation. The time frame is longer than 90 days. 

Long-term care services are provided in three ways:

  • An assisted living facility
  • At home with the help of a caregiver
  • In a nursing home

In general, Medicare and Medicaid don’t cover the cost of assisted-living facilities. Nursing homes offer the broadest range of services, and these are primarily paid for by Medicaid. If someone meets annual income limits, Medicaid might also pay for nursing care.  

Consider the Cost

The cost of long-term care depends on the services provided, for how long, and where. Let’s give you some examples for 2021:

  • A private room in a nursing home – $297 per day, or $9,034 per month
  • A semi-private room costs, on average, $260 per day, or $7,908 per month

Something else to consider is that women need long-term care for around 3.7 years, on average. Men, on the other hand, only need it for 2.2 years. 

Do You Understand How Medicare and Medicaid Work?

When you reach the age of 65, some long-term care costs are paid for by Medicare and possibly Medicaid. However, there are some differences.

  • Medicare – will pay for long-term care if it’s prescribed by your doctor or other skilled services
  • Medicaid – each state administers this differently, but in general, it covers a wider scope of long-term care services. However, you must meet asset and income requirements.

The asset limit in most states is around $2,000 for individuals and $3,000 for a couple that live together. These limits have led many retirees to spend down or give away their assets. However, to counter this, the government looks at applicants’ finances going back five years. Assets that a person no longer has are factored in when gauging whether a person meets the requirements.

In certain states, you can buy long-term care insurance and the government will let you reduce your assets by the amount of the insurance you purchased. This allows you to qualify for Medicaid   

Think About How You’re Going to Pay

Typically, people have three options when it comes to paying for long-term care:

  • Tapping into retirement savings
  • Looking for insurance coverage
  • Relying on Medicaid and Medicare

The consensus from experts is that a combination of the above will best suit your needs.

Long-term care insurance is also an option. In this case, policyholders are reimbursed a set amount to cover their care costs.

Converting a life insurance policy into a long-term care plan is your final option. You sell your life insurance policy to a company and they pay out between 30% and 40% of the full benefit to cover your long-term care costs. If there are any funds left, they go to a beneficiary of your choosing.  

Don’t Delay in Making Plans for the Future

When is the best time to start making plans for the future? There’s no time like the present, especially if you’re already in your late 40s to mid-50s. 

The sweet spot for most people is mid-50. At this age, there are many people still eligible for long-term care insurance. By the time you reach your 60s and 70s, you become insurable. 

There’s not a whole lot of long-term care planning going on at the moment. Many people still rely on family members and Medicaid or opt for the self-funding route. 

If you want to look forward to your senior years, take the time to examine all your options. Make the right decisions and you’ll have no financial worries when it comes to your long-term care. In addition, you won’t have to burden your partner or loved ones and be able to enjoy their company when you need it the most.