Navigating Long-Term Care: Planning for Aging and Assistance

As we age, it becomes essential to prepare for the potential costs of long-term care and impairment. The natural process of aging often leads to a decline in our ability to perform daily activities, and this decline tends to become more pronounced as we grow older. Among the elderly population in the United States, known as the “oldest old,” more than half experience physical or mental impairments that require long-term care. Long-term care refers to the personal assistance needed by individuals with impairments to carry out daily routines like eating, bathing, and dressing.

Understanding Aging and Long-Term Care

Individuals in need of long-term care often require it for an extended duration, sometimes until the end of their lives. However, some individuals may require similar care for shorter periods, such as during recovery from hospitalization, injury, or illness. This variability complicates the understanding of long-term care financing. While certain long-term care services, like home health care, may be covered by health insurers to aid in recovery from specific medical events, they generally do not cover care needed due to nonspecific age-related causes or chronic impairments.

Entering the Long-Term Care System

When the needs of an elder can no longer be met within their home or without the assistance of paid providers, they enter what is commonly referred to as “the long-term care system” or sometimes called “the maze.” At this point, the elder and their family embark on a challenging journey through a fragmented system of services that fail to adequately address the diverse needs of the elderly and disabled in various long-term care settings. The current system lacks economic efficiency and fails to ensure the quality of provided services. Assisted living is not adequately funded, and home health care services are inconsistently provided. The long-term care financing system tends to favor institutional settings like nursing homes. Currently, elderly individuals finance long-term care through various sources, including personal savings, support from friends and family, long-term care insurance, and assistance from public programs such as Medicaid and Medicare.

Financial Constraints and Limited Benefits

The availability of publicly funded programs primarily determines the financial decisions individuals make when preparing for their long-term care needs. Medicare and Medicaid, along with veterans benefits, are the primary programs providing public support for long-term care. Although Medicare does not cover long-term care itself, it has become a de facto long-term care financier by covering care in skilled nursing facilities, home health care, and hospice care to an increasing extent. Medicaid is the primary public insurance program for long-term care, offering coverage for individuals with very low income and allowing middle-income individuals, including comfortably retired seniors, to qualify by spending down their income and assets.

Home and Community-Based Care

The government provides minimal benefits to support individuals in remaining in their own homes for as long as possible. Similarly, for those who choose to move into assisted-living residences where they receive assistance with daily activities, the government does not cover the costs of this care. This type of care is considered personal care rather than health care, according to legislative decisions.

Medicare and Health Care

It is a common misconception that Medicare covers long-term care. However, Medicare primarily covers health care services and excludes personal or custodial care. For instance, Medicare provides limited benefits for short stays in skilled nursing facilities following hospitalization. Hospitals are under increasing pressure to reduce inpatient stays due to Medicare’s payment system. Consequently, patients who are not ready to return home may be discharged to skilled nursing facilities. As a result, most nursing home residents either have short stays covered by Medicare skilled care or exhaust their benefits during their stay.

Medicaid and Nursing Home Care

For individuals requiring nursing home care, the legislature also categorizes it as personal care rather than health care. Most nursing home residents initially receive skilled nursing care (which is covered by Medicare and health insurance), and then transition to intermediate care (which is long-term care and typically paid for privately, through long-term care insurance, or Medicaid).

Despite the costs involved, there are advantages to privately paying for nursing home care. One significant benefit is the potential for easier admission to a nursing home. Some nursing homes, particularly in certain states like Maryland, do not accept Medicaid residents and only admit residents who can afford private payment. For individuals residing in nursing homes that do not accept Medicaid, gaining admission to a Medicaid-certified facility can be challenging. Planning for Medicaid eligibility may, therefore, limit the options available for choosing a nursing home.

Methods of Financing Long-Term Care

Individuals preparing for future long-term care needs have several options to consider. One approach is to “self-insure” by setting aside personal savings and assets and supplementing them with donated care from family and friends. In fact, the majority of impaired seniors rely solely on donated care and their own savings. The value of donated care is difficult to quantify but likely surpasses other forms of long-term care financing.

Self-insuring allows individuals to retain maximum control over their savings and assets but also entails assuming the full financial risk of impairment, depending on the extent and duration of functional losses. Significant impairment can deplete wealth, leaving little or no resources available for bequests or other purposes.

When it comes to paying for the costs of long-term care, whether in a nursing home, assisted living facility, or home- and community-based care, there are essentially two choices: private wealth or public benefits. These options are not mutually exclusive, as most public benefit programs in the United States involve cost-sharing or co-payment requirements. For example, Medicare’s skilled nursing facility benefit covers all costs for the first 20 days, but from the 21st to the 100th day, patients must pay a co-payment of over $110 per day. Medicaid mandates that nursing home residents contribute all their income to the facility, with certain deductions like the Personal Needs Allowance.

Private Wealth

Private wealth encompasses an individual’s own money, their family’s resources, and borrowed funds. It includes liquid assets such as bank accounts, certificates of deposit (CDs), and savings bonds, as well as illiquid assets like real estate and business interests. Insurance also forms part of private wealth.

It’s essential to recognize that private wealth can consist of both assets and income. This distinction is significant because individuals with disabilities or impairments typically require a reliable income stream to sustain their standard of living, rather than a lump sum of assets. Different sources of income can include Social Security retirement benefits, Railroad Retirement, pensions, rental income, royalties, immediate annuity payments, interest, dividends, alimony, installment note payments, reverse mortgage payments, lines of credit, and earnings from employment.

Public Benefits

Apart from Medicare and Medicaid, there are few other public benefits available to cover long-term care costs. To summarize:

• Medicare covers health care services such as hospital and doctor bills, rehabilitation in skilled nursing facilities, and hospice care.
• Medicaid covers intermediate care in nursing homes for eligible individuals who meet minimum asset and income thresholds and exemptions.
• Medicaid or State Medicaid waiver programs provide health care coverage for indigent individuals.
• Veterans benefits offer health care coverage and may cover some long-term care costs based on the veteran’s status and the facility involved.

Supplemental Care

Many families seek assistance in preserving their assets and avoiding impoverishment due to nursing home costs. They often turn to professionals for help in achieving Medicaid eligibility for themselves or their loved ones.

While Medicaid provides a limited set of benefits, it is important to note that it finances care that should include essential elements, such as nursing home care that promotes the maintenance or enhancement of each resident’s quality of life. The facility must provide the necessary care and services to help residents achieve or maintain their highest practicable physical, mental, and psychosocial well-being, based on their comprehensive assessment and care plan.

Unfortunately, there is no guarantee that all of an elder’s needs will be met in a nursing home. The shortcomings in nursing home care are well-documented, with studies indicating consistently poor quality of care. Inadequate staffing is often identified as a primary factor contributing to substandard care. In fact, a major federal study found that more than 90 percent of nursing homes lack sufficient staff to properly care for residents.

Given these limitations, it is clear that relying solely on a financing system that offers minimal benefits is insufficient to meet the comprehensive needs of our clients. We must strive to do more, where resources allow, by implementing a plan that incorporates supplemental care services for our elder clients.

With that in mind, our firm takes an elder-centered approach. We prioritize the well-being of our elder clients, working in their best interests at all times. Our goals revolve around improving their quality of life, assisting them and their families with healthcare decisions, and preserving family wealth, in that order of priority.

The methods of financing long-term care discussed earlier—private wealth and public benefits—are not mutually exclusive. Public benefits often involve cost-sharing or co-payment components, necessitating some degree of private contribution. For instance, Medicare’s skilled nursing facility benefit covers only a limited duration, while Medicaid requires individuals to contribute their income to the nursing home, with certain allowances.

Private wealth encompasses both assets and income. It involves personal and family resources, as well as borrowed funds, and includes liquid assets like bank accounts and illiquid assets such as real estate and business interests. The distinction between assets and income is crucial, as individuals with impairments typically require a reliable income stream to maintain their standard of living.

Public benefits primarily include Medicare and Medicaid, with Medicaid serving as the dominant public insurance program for long-term care. Other public benefits are limited in scope and availability, such as state Medicaid waiver programs and veterans’ benefits.

In conclusion, navigating the complex landscape of long-term care requires careful consideration of financing options. While public benefits and private wealth play important roles, it is crucial to focus on an elder-centered approach that prioritizes the individual’s well-being, assists with healthcare decisions, and seeks to preserve family wealth to the extent possible. By addressing these aspects comprehensively, we can strive to improve the quality of life for our elder clients and their families.

To learn more about estate planning and elder law, visit Estate and Elder Planning by David Wingate at www.davidwingate.com. For an Initial Consultation, call (301) 663-9230. We can assist you with powers of attorneys, living wills, wills, trusts, Medicaid planning, and asset protection. With office locations in Frederick, Washington, and Montgomery Counties, Maryland, we are here to provide you with peace of mind.

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