Long Term Care Costs and How to Pay for Them

Long term care is a big concern for many older Americans, and there's a good reason for that. These concerns are justified, particularly when you consider that many of these people seriously underestimate how much services like long term care cost. For example, a single month in a shared room in a nursing home is $6,660 in 2012. For $3,550 a month, a resident who has some ability to care for his or herself could live in an assisted living facility. A person who opted instead to have a home health aid come to their home to administer care paid $21 an hour. As you can imagine, it doesn't take long for a retired person to blow through their savings and assets.

More and more families find themselves confronting these costs each day. There are a few options available for older people who need long term care now and for those who will need long term care in the future. These options are complex, however, and vary a great deal from family to family, due to the rules governing the different parties involved.

For certain people, Medicaid can be used to cover the costs of long term care. Medicaid eligibility is based on income and asset levels. Those with a lot of money in assets or income are ineligible for this program. Each state controls the exact income and asset levels that govern their residents' eligibility.

For some people, these thresholds can be met by spending down their assets. Spending down your assets must be done in a certain way when you pay for elder care. It isn't simply a matter of giving away your assets to your family members. If you don't, you can be disqualified from the program or be charged fines. Because it is a complex issue that varies from state to state, it is best for those who are interested in qualifying for Medicaid to speak with their state Medicaid administrators. You may also need to consult with an attorney.

One option for younger people worried about future costs is to invest in long term care insurance. Long term care insurance provides for a certain amount of money to cover expenses, but with limitations. These policies may have lifetime caps that will only pay out their daily amount for so many days or years before the policy is no longer applicable. There may be limits on the total amount of money the policy will cover for medicaid qualified spend down. These policies are governed by eligibility rules and those with certain pre-existing conditions and those who already need care will likely not qualify.