Long Term Care

Long-term care (LTC) is the term used to describe a variety of services in the area of health, personal care, and social needs of persons who are chronically disabled, ill or infirm. Depending on the needs of the individual, long-term care may include services such as nursing home care, assisted living, home health care, or adult day care.

Who Needs Long-Term Care?

The need for long-term care is generally defined by an individual’s inability to perform the
normal activities of daily living (ADL) such as bathing, dressing, eating, toileting, continence, and moving around. Conditions such as AIDS, spinal cord or head injuries, stroke, mental illness, Alzheimer’s disease or other forms of dementia, or physical weakness and frailty due to advancing age can all result in the need for long-term care.

While the need for long-term care can occur at any age, older individuals are the typical recipients of such care.

Individuals with Disabilities by Age¹

What Is The Cost of Long-Term Care?

Apart from the unpaid services of family and friends, long-term care is expensive. The table on the following page lists national average costs (regional costs can vary widely) for typical long-term care services. One federal study estimated that on average men will need 2.3 years of long-term support services, while women will need 3.2 years of such care.²

Paying for Long-Term Care – Personal Resources

Much long-term care is paid for from personal resources:

Out-of-Pocket: Expenses paid from personal savings and investments.
Reverse Mortgage: Certain homeowners may qualify for a reverse mortgage, allowing them to tap the equity in the home while retaining ownership.
Accelerated Death Benefits: Certain life insurance policies provide for “accelerated death benefits” (also known as a living benefit) if the insured becomes terminally or chronically ill.
Private Health Insurance: Some private health insurance policies cover a limited period of at-home or nursing home care, usually related to a covered illness or injury.
Long-Term Care Insurance: Private insurance designed to pay for long-term care services, at home or in an institution, either skilled or unskilled. Benefits will vary from policy to policy.

Paying for Long-Term Care – Government Resources

Long-term care that is paid for by government comes from two primary sources:

Medicare: Medicare is a health insurance program operated by the federal government. Benefits are available to qualifying individuals age 65 and older, certain disabled individuals under age 65, and those suffering from end-stage renal disease. A limited amount of nursing home care is available under Medicare Part A, Hospital
Medicaid: Medicaid is a welfare program funded by both federal and state governments, designed to provide health care for the truly impoverished. Eligibility for benefits under Medicaid is typically based on an individual’s income and assets; eligibility rules vary by state.

In the past, some individuals have attempted to artificially qualify themselves for Medicaid by gifting or otherwise disposing of assets for less than fair market value. Sometimes known as “Medicaid spend-down”, this strategy has been the subject of legislation such as the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93). Among other restrictions, OBRA ’93 provided that gifts of assets within 36 months (60 months for certain trusts) before applying for Medicaid could delay benefit eligibility.

The Deficit Reduction Act of 2005 (DRA) further tightened the requirements to qualify for Medicaid by extending the “look-back” period for all gifts from 36 to 60 months. Under this law, the beginning of the ineligibility (or penalty) period was generally changed to the later of: (1) the date of the gift; or, (2) the date the individual would otherwise have qualified to receive Medicaid benefits. This legislation also clarified certain “spousal impoverishment” rules,
while making it more difficult to use certain types of annuities as a means of transferring assets for less than fair market value.

¹Source: U.S. Census Bureau, 2019 American Community Survey 1-Year Estimates, Sex by Age by Disability Status for the Civilian noninstitutionalized population, male and female, Table B18101.

²See “Long-Term Services and Supports for Older Americans: Risks and Financing, 2020,” Table 1. U.S Department of Health and Human Services, Office of Behavioral Health, Disability, and Aging Policy. January 2021.

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