Thinking Long Term in the Short Term

Help from a family member has the great advantage of being low or no cost; it’s also likely to be trustworthy. But the stress can be particularly severe for caregivers who are also helping other elderly relatives, working full time, or caring for small children. Family care can bring up unpleasant issues between relatives. And family members are rarely qualified to give medical care, if it’s required. Family help is often best when the need is limited—a weekly ride to the doctor, for instance.

Spending family assets is another way to provide care. If your total wealth is more than $4 million to $5 million, you may be able to pay the cost of care yourself. You’ll probably be able to choose the best care and decide how you receive it, whether that’s in your home, an assisted-living community, or a nursing home. But it will cost you. A top nursing home in an expensive part of the country might cost $70,000 or more a year.

In such cases, buying long-term care insurance becomes a form of financial and estate planning. “If you have more than four or five million you might not need [the coverage], but I find that those clients often want it,” says Keith Moeller, a long-term care specialist with The Columns Resource Group, a Minneapolis-based division of Northwestern Mutual Financial Network in Wisconsin.

Funding your own care may also mean giving family members some control over your assets, in case you are unable to make spending decisions. “If someone is legally in charge of her assets but is incapacitated, you will have a very difficult time getting control of those assets. You’ll be out of pocket for some unexpected, significant expenses without any immediate means of replacing those funds,” says Schnebele.

Many people rely on a combination of their own assets and Medicaid to fund nursing care. Medicaid will pay for full-time care in an approved nursing facility once the patient has no more than $3,000 in assets, excluding home and car. “A lot of people go into a nursing home with some assets, but most spend down those assets and qualify for Medicaid,” says John Hustad, former vice president of public affairs for the Minnesota Health and Housing Alliance, a St. Paul–based trade association. “Two-thirds of people in nursing homes are on Medicaid.”

Medicaid can be a good choice for people with relatively modest wealth. “If you have investment assets below $100,000, you would likely be eligible for Medicaid dollars pretty quickly,” Moeller says. But Medicaid only pays for full-time nursing home care and minimal home care, and may not cover the bill at the most expensive facilities. If you foresee wanting in-home help, a place in an assisted-living community, or more choice in nursing homes, Medicaid isn’t the best option.

There’s no guarantee that Medicaid will continue to pay for nursing home care, either, particularly as baby boomers age and financial pressures on the system increase. “Either more people need to get long-term insurance, or we’re going to go broke,” says Rick Carter, president and CEO of Bloomington-based Care Providers of Minnesota, an association representing long-term care facilities in the state.