A prolonged stay in a nursing home can be very expensive. For some, it could wipe out their retirement savings. Consider this, according to Morningstar, a 70-year-old couple who incur expenses for long-term care see their wealth decrease—on average—21% over nine years. As we get closer to retirement, it is something we should all be considering. Today, we tell you the statistics you should know about long-term care in 2024.
0:00 - Intro
0:42 - The staggering costs of care
2:12 - When Medicare pays for long-term care
2:53 - Using Medicaid to pay for care
4:16 - How many people spend the big bucks on care?
4:58 - Long-term care insurance sticker shock
6:32 - Are people worried and are they doing anything about it?
The staggering cost of care
The Median cost of Nursing Home Care
According to Morningstar, the median cost of nursing home care is roughly $8,800 per month or $108,405 per year. In speaking with clients, this is in line with what many of them experience locally. It is not a small number!
Home Health Aid
If possible, most of us would prefer to remain in our homes as long as possible. Based on a 44-hour week and 52 weeks per year, the median cost of a home health aid is roughly $5,148 per month.
Assisted Living Facility
In many cases, the first step for long-term care is moving into an assisted living facility. The median cost of residing in one of these facilities is $4,500 per month or $54,000 per year.
Adult Day Care Services
Many times, people will drop off their elderly family members at an adult day care facility. The national median cost for this type of service is $20,800 per year or $1,780 per month.
The Role of Medicare and Long-Term Care
There is a lot of confusion about who pays for long-term care services. Many people believe Medicare will foot the bill. They pay a limited amount for this type of care. Roughly 18.2% of long-term care costs were paid by Medicare in 2020. Medicare pays for long-term care services on a very limited basis with some very specific rules.
- You must go directly to a skilled nursing facility directly from a hospital.
- Your care must be medically necessary.
- You must show signs of continuous improvement.
- And it pays a maximum of 100 Days
For most Americans, they will either use their own assets or rely on funds from Medicaid.
Medicaid and Long-Term Care.
Medicaid is healthcare assistance provided by state governments. It is generally regarded as a program for needy families and individuals. In 2019, nearly two-thirds of the long-term care expenses were paid for by Medicaid. Long-term care expenses make up 21% of the Medicaid outlays for care.
Qualifying for Medicaid requires a "spend down" of your assets. This means you have to use your retirement savings to pay for your care until you reach certain limits. Limits vary by state. You can click here to see the limits for West Virginia and here to see the limits for Ohio.
Are big long-term care expenses likely?
This remains one of the biggest questions on the minds of retirees. What are the chances that you will need care from a family member, in your home, or a facility? Here are some of the numbers from the Morningstar reports:
The portion of people age 65 this year who are expected to spend $50,000 or less for long-term care services.
The portion of people age 65 this year expected to spend between $50,000 and $150,000 on long-term care services.
The portion of people turning 65 will spend between $150,000 and $250,000 on long-term care services.
The portion of people turning 65 who will spend over $250,000 on long-term care services
While major outlays may not have a high likelihood, the potential cost when they do should be cause for concern.
Long-term care insurance sticker shock
You can insure against the potential risks associated with long-term care costs. Many times we find people suffer from a significant amount of "sticker shock." Let's consider this example:
Base Policy Example
- Issue age: 55 years old.
- $165,000 initial pool of benefits
- 3% cost of living adjustment
The probabilities and the total cost of coverage may leave you scratching your head saying, "I have an 87% chance of spending $150,000 or less on these types of services, I'll take my chances!"
Let's talk about it...
This is a risk every retiree faces in their lifetimes. When you consider the financial impact it could have on your spouse or your family, it is worth discussing the details. We can help illustrate the impact an event like this could have. Simply fill out the form to the right and a member of our team will reach out to you to discuss it.
Appearing in this video:
Michael Seese, CFP®
Mike is a Certified Financial Planner™ Professional in our Parkersburg office. He has been helping clients plan for more than 28 years.
Neal Watson, CFP®
Neal is a Certified Financial Planner™ Professional in our Marietta office. He also has been helping clients plan for more than 28 years.