Saturday, December 29, 2007

Long Term Care -- Ticking Bomb in Your Future

My ninety-year-old mother's fall on Thanksgiving Day underscored once again the importance of making plans for nursing home care. I'll try to keep it short, but here are some terms and concepts everyone should know.

Care giving

Getting older involves several stages of "care giving." That is the generic term used by professionals when referring to helping someone deal with the challenges of everyday living. It applies to disabled people generally, not just those who are aging. It may come from anyone. Care giving typically starts with spouses, children and other family members, and progresses to others outside the family. Neighbors, church members and other volunteers often help, followed by paid sources, often referred by social service professionals, working as aides, sitters or nurses.

Thousands of words can be written about care giving, but it all comes down to one reality: Care giving takes time, patience and energy, both physical and mental. A few individuals are gifted with an extraordinary drive to do care giving well, but I have met very few people who willingly do a good job, full-time, without being paid.

Write this down: Some people die quickly, but those who creep up on death a little at a time can expect to need full time care giving in a safe environment.

Lifestyle Stages

How long we remain in denial varies greatly from one person to another, but everyone can expect to move through one or more of the following stages as we age. They are loosely tied to what (again, called by the pros) is called ADL, the Activities of Daily Living. Getting dressed, eating, going to the bathroom...just the basics.

Independent Living

If you want an exercise in cognitive dissonance look what comes up when you Google "independent living" -- thousands of links referring to an infinite variety of ways that people reach the very edge of "independent." In fact, they have in common being more dependent than the norm, not less, requiring at least some recognition and accommodation for that dependency.

My work in a retirement community, together with a continuing education course at a local university, has given me a close look at this stage of living. There are specific and important details that go into the design and organizational structure of an independent living environment. As in every specialty, some do it better than others, so the best advice I have is for anyone making plans to do as much homework and field work as possible.

Assisted Living

The next step in aging calls for assisted living. Here again there is a bewildering array of options, but this is the intermediate stage between "independent" living and "long term care." At this point, government steps in. Assisted living facilities are required to meed specific guidelines and are subject to state inspections.

Generally speaking, an assisted living environment furnishes a significant degree of personal care. Anything up to the threshold of medical attention can be provided. In the case of medication, the professionals can remind but not administer meds. Private duty nurses can be employed by the resident or their designated agent, but a facility nurse is there to monitor the population and coordinate the staff, not provide nursing care for any individual except for emergencies.

Continuing Care Retirement Communities

The baby boom has produced a product made to order for us as we age, the CCRC. A continuing care retirement community can be either for-profit or not-for-profit. The aim is to provide a place where those who are accepted can expect to live for the remainder of their natural lives, including long-term skilled nursing and Alzheimer's care if needed. The aging resident graduates as needed to the next stage of care. Movement from one stage to the next is not as difficult as one might imagine. All the providers have to do is wait, and the inevitable process of aging does the rest. A few stubborn individuals refuse to move to the next stage, literally until they die. But statistically, everyone matriculates one way or another.

What are the costs?

This is the reason for my post. The "ticking bomb" in the title is not the aging process or even the onset of declining health or dementia. Except for a small portion of the population, the real pain of aging will be watching a lifetime of work come to an end as even the most pitiful of estates are consumed by the expense of long-term care. That is the euphemism for what most people know as "nursing homes."

Current costs for long term care average about sixty to seventy thousand dollars a year. Five or six thousand a month is what one can expect, whether it be for round-the-clock in-home care, or as a resident in a facility dedicated to the purpose.

Where does the money come from?

Are you sitting down?

Assisted living is private pay. If you thought Medicare covered the costs you have been misinformed.

Likewise, long term care is private pay. It is not covered by Medicare.

Let that sink in.

Most people imagine that they will be taken care of by Medicare if they require assisted living or go to a nursing home, but that is not true. Here's the deal: IF you have been admitted to a hospital for three days (doctors orders) and IF you are discharged for rehabilitation to a facility licensed and approved for that purpose, Medicare pays twenty days of your therapy. For the next eighty days, Medicare pays all but about $124 a day. That amount will be the responsibility of the patient or their agent. A "medigap" policy (commonly called Medicare Part B) pays that amount.

Custodial Care

At the end of 100 days of rehabilitation, Medicare stops and you are on your own. After that your care is considered "custodial." Some people return to independent or assisted living after that, but long-term care, i.e. a nursing home, is for many the next step.


Medicaid is a state administered program and each state sets its own guidelines regarding eligibility and services.

Got that? Medicaid and Medicare are not the same. Medicare is federal. Medicaid is state. And they do not have the same mission.

Medicare is for (as the word says) medical care.

Medicaid is for (as the word suggests) financial aid.

Let the confusion come to an end. Medicaid is welfare. It is government financial assistance for those who cannot afford to pay. There are a variety of reasons, but in the end, if you cannot afford to pay, then someone else must.

In the case of long term care, here's how it works. Someone entering a nursing home is expected to pay. If they don't have enough money they are expected to start liquidating assets. After the money is gone, the house, all investments, property and other assets....then they can apply to receive Medicaid assistance. It's called spending down.

I want to end this post by simplifying and clarifying a couple of budget realities.

Think of your material wealth as having two parts, nest egg and income.

Your nest egg is all you own and hold, including IRA's, home equity, that old junk classic car you think is worth something, whatever. Anything you can convert to money counts.

Income is what you can expect to receive as long as you live...Social Security check, pension, annuity, lifetime stipend form a rich benefactor, whatever.

If your income meets expenses you're okay. That means if an when you have to pay for long-term care (either at home or in a facility operated for the purpose) and have sixty-five thousand annually in after-tax disposable income you're all set. (Uh, maybe double that if you are a married couple and both of you have to have skilled nursing care.)

Otherwise, you will be liquidating your assets until you have become officially destitute. After you have successfully "spent down" to that point, you are at the mercy of the state and will probably by then have a very different view of welfare than you may now have.

At this point, my wife and I are contemplating our future plans along these lines. Our anticipated annual income is not going to be near enough to pay for long term care, if needed, as it now exists and most people we know are in the same boat. If we come up with any good solutions I'll keep you posted.

(The obvious solution is income-producing assets: rental income, stock dividends, interest from CD's and distributions from IRA's. One alternative to spending down is to let your heirs pick up the bills privately. Every dollar applied to that purpose is one less dollar that will otherwise reduce their inheritance.)

I am reminded of Will Rogers' advice on how to make money in the stock market.

"The way to make money in the stock market is to buy a stock. Then, when it goes up, sell it. If it's not going to go up, don't buy it!"


Jill said...


I'm late in catching up on posts and mail. You make some very good points about long term care, but I wonder if the crisis is really all that bad.

The great majority of people aren't sick for that long and don't need long term care for that long.
I know there are any number of stories where that isn't the case and you probably hear a lot more of them than I do working in a retirement home as you do.

If you can afford to, long term care insurance will ease some anxieties, though it's quite expensive and you need expert help in finding the best policy.

I don't think the reality is so gloom and doom.
I just am very hopeful about the future. Like usual, I think we will fumble and stumble and we'll figure out how to take care of everyone that needs to be taken care of even if we end up caring for each other. Likely, the huge market of aging boomers will attract more technology to make it much easier and cheaper to age in place and live independently as long as possible.

I think the best way to prepare for old age is to have great expectations about a vigorous old age.
Your attitudes towards aging will affect your experience of old age more than anything else.

Maintaining good health with regular exercise, strong relationships with a variety of people, practicing a religion that suits, finding a path of service to others, all of these are what works to make old age better.

Hoots said...

I guess you're right. I'm still uneasy until my mother's situation gets settled, however I know of several cases where long-term care is overdue but for one reason or another the family or individual or both are not taking the steps to make it happen. The statistics bear out what you said. The length of time LTC is needed averages only a couple of years. I can't find the figures at the moment, but only about a quarter of those who enter a nursing home live longer than three or four years. And a good many people die from any number of causes, never having reached the need.

What's great about a retirement community is the inspiration you get from people past ninety. A whole new attitude kicks in when people pass ninety. This morning we wished a Happy New year to one man and said, "so tell us about your resolutions."

"I didn't make any," he said. "I don't have any bad habits and didn't see any need to change!"

That's what I call keeping your tank full. With that kind of thinking you never run out of gas.

Joe said...

I just wanted to say that your post is great. I learned a lot about finances that I really didn't know much about. I was hit in the face with truth about medicare, that is definitely something that is not laid out very clearly.

I have been doing more and more research on this topic as the time gets near, and your post has been very helpful. One other really helpful site I found was Great Places Inc. They have this great toolkit section that outlines a lot of the things you were saying, plus more. They also have a search function on the site, which I thought was pretty handy. Worth checking out!

Thanks again for a great post and I hope all works out with your Mother. It is good to see that you are finding happiness/inspiration in places you least expect. :)

Hoots said...

Thanks, Joe, for your comments and kind words. It is now five months later than when I wrote the post and my mother is comfortably located in an excellent nursing home, with Medicare, Medicaid and her meager Social Security check paying the way.

This did not happen by accident. About twelve years ago she liquidated the small "estate" she and Dad had left, divided it with me and my sister and moved to a rented apartment. Consequently she had no assets and did not have to "spend down" to qualify. She was already officially destitute.

Anyone who wants to gamble may be tempted to liquidate his or her estate and deed over property to heirs at the last minute, but they should know that Medicaid has rules that make that a bad choice. There is a ten-year lookback into the financial records of those receiving Medicaid funds and anyone attempting to beat the system is subject to having government collections and/or leins on property as a consequence.