Long–term care insurance is different from medical care because it generally helps you to live as you live now instead of improving or correcting medical problems. People often think of long-term care as strictly nursing home care. Long-term care services actually may include help with activities of daily living, home care, respite care, hospice care, or adult day care. This care may be given in your own home, a daycare facility, assisted living facility, a nursing home, or a hospice facility.
These are individual insurance policies that may help you when you are unable to take care of yourself due to prolonged illness or disability. This policy usually pays for skilled, intermediate, and custodial care in a nursing home. Home health care, adult day care, and assisted living care are also often covered. These policies usually pay a fixed amount per day or per visit to facilities or caregivers that are licensed by the state and/or participate in Medicaid and Medicare.
How much does long-term care cost?
Long-term care can be expensive. The cost depends on the amount and type of care you need and where you get it. Below are some average annual costs for care in a nursing home, an assisted living facility, and your own home. Long-term care may cost more or less where you live.
Nursing Home Costs
In 2018, the national average cost of nursing home care was about $89,297 per year (for a semi-private room). This cost doesn’t include items such as therapies and medications, which could greatly increase the cost.
Assisted Living Facility Costs
In 2018, assisted living facilities reported charging $4,000 a month (for a one-bedroom unit) on average, or $48,000 per year, including rent and most other fees. Residents may pay more for additional care.
Home Care Costs
In 2018, the cost of basic home care averaged $22 per hour for a home health aide in the U.S. That’s $34,320 per year for a home health aide who visits six hours a day, five days a week. Skilled care from a nurse in your home is typically more expensive. Annual costs for home care depend on the number of days a week the caregiver visits, the type of care required, and the length of each visit. Home care can be unaffordable for many if round-the-clock care is required. These costs are different across the country. Your state insurance department or the insurance counseling program in your state may know the costs for your area.
How can I pay for long-term care?
People pay for long-term care in different ways. These include individuals' or their families' personal resources, including savings, investments, or other assets such as a home, long-term care insurance, and some help from Medicaid for those who qualify. Medicare, Medicare supplement insurance, or your employee or retiree health insurance usually will not pay for long-term care.
Medicare does NOT cover long-term care. However, Medicare Part A does cover skilled nursing facility care, nursing home care (as long as custodial care isn’t the only care you need), hospice care, and limited home care. You should NOT count on Medicare to pay your long-term care costs.
Medicare Supplement Insurance
Medicare supplement insurance (Medigap) is private insurance that helps pay for some of the gaps in Medicare coverage, such as hospital deductibles and physician charges greater than Medicare approves. Medigap usually doesn’t pay for long-term care.
Medicaid is a government-funded program that pays for nursing home care only for individuals who are low-income and have spent most of their assets. Medicaid pays for nearly one-third of all nursing home care in the U.S., but many people who need long-term care never qualify for Medicaid assistance. Medicaid also pays for some home- and community-based services. To get Medicaid help, you must meet federal and state guidelines for income and assets. Many people start paying for nursing home care out of their own money and "spend down" their income and assets until they’re eligible for Medicaid. Medicaid then may pay part or all of their nursing home costs. You may have to use up most of your assets paying for your long-term care before Medicaid is able to help. You may be able to keep some assets and income for a spouse who stays at home. Also, you may be able to keep some of your assets if your long-term care insurance is approved by a state as a long-term care insurance partnership policy.
State laws differ about how much income and assets you can keep and still be eligible for Medicaid. (Some assets, such as your home, may not keep you from being eligible for Medicaid.) However, federal law requires your state to recover from your estate the costs of the Medicaid benefits you receive, subject to certain rules. Contact your state Medicaid office, state office on aging, or Department of Social Services to learn about the rules in your state.
What is the difference between a tax-qualified and a non-tax-qualified plan?
Benefits paid by a tax-qualified long-term care plan generally are not taxable as income. Benefits from a non-tax-qualified long-term care plan may be taxable as income. Check with your tax advisor about the possibility of deducting a portion of the premiums paid in addition to the individual tax consequences involved.
Ask these questions before you buy:
- Do you have any serious health issues?
- What is your financial situation?
- Where would you prefer to live if you could no longer care for yourself?
- Who do you trust to make decisions for you should you become incapacitated?
- What are your end-of-life wishes?
This article is provided by the National Association of Insurance Commissioners (NAIC). Learn more about long-term care from a licensed financial advisor using our one-of-a-kind Find An Advisor tool.