Long-term care planning and the rising costs of nursing home care

During the estate planning process, long-term care planning has to be part of the process. This is because many of us will need this, whether it is because we make it to late in life or due to some accident or disability. Plus, the costs can bust even the most well-thought-out estate plan.

Nursing home costs surge

According to the Congressional Research Service and Genworth, nursing home costs have surged during the new millennium. The price of a private room has increased by 62% between 2004 and 2020, and assisted living facility costs have increased by nearly 80% during this same time. This has cost Americans over $60 billion.

What does this mean for individuals?

Of course, long-term care fees will vary based on the facility and its location. A facility in Donna, Texas, will likely be cheaper than one in Arlington, Texas, and both will likely be cheaper than one in Boston, Massachusetts. On overage though, long-term care services cost $138,000 per year, and individuals or loved ones are usually responsible for about half of those costs.

Though, again, these fees can vary wildly, but for about 16%, their out-of-pocket costs will be more than $100,000 because health insurance policies often do not offer the amount of relief one would expect. Even many long-term care benefits only cover a limited number of services, like daily living task (eating, bathing, etc.), which means families must pay for additional services.

What about Medicare or Medicaid?

While Medicare can cover some short-term skilled nursing care, when medically necessary, it does not typically cover long-term care. Medicaid, on the other hand, does offer some coverage for long-term care, which is why in 2017, it covered about 60% of nursing home residents. Though, these benefits will only kick-in when residents meet low-income requirement. In 2019, this 60% figure represented nearly $200 billion and demonstrates why planning for this in an estate plan is so crucial.