How to Pay for Long-Term Care
Hint: don't look for help from the government
Every now and again, I hear an older person say that they don’t want to end up going in a nursing home and giving all their money to Medicaid. Fun fact: their money isn’t going to Medicaid. It is going to the nursing home, and Medicaid is paying whatever amount they can’t cover.
Like child care, long-term care is expensive. Like child care, people who work in long-term care are underpaid. Unlike child care, most of the cost is covered by government subsidies in the form of Medicaid. The catch is that to qualify for Medicaid, you have to have spend down almost all of your assets. Essentially, you have to go from middle class to poor. Given that a private room in a nursing home costs about $10,000 a month, that can happen right quick.
In addition, most private pay nursing homes require a large up-front deposit. Even people who have the money are often taken aback by the need to come up with a $30,000 check in three days. It makes sense, because nursing homes don’t want to evict patients. Some private pay nursing homes will allow residents to convert to Medicaid payment, but only after they have been a private pay patient for a certain amount of time—and they may ask for an upfront deposit to cover that period.
I’ve had relatives go straight to Medicaid because they had few resources other than their monthly Social Security check. I’ve had relatives go on Medicaid after spending down decent-sized nest eggs after years of assisted living and long-term care. I’ve seen the scramble to come up with an initial deposit at a private-pay nursing home for a relative sent to long-term care after a hospital stay.
The reality is that as I write this, two-thirds of nursing home patients are on Medicaid. The One Big Beautiful Bill relies on Medicaid cuts to help fund tax cuts. It’s safe to say that two things are going to happen: fewer people will qualify for Medicaid long-term care coverage, meaning that their families will have to pick up the slack; and private pay rates at nursing homes will go up, increasing the rate and frequency of asset spend-down.
In a perfect world, people would petition their elected officials, who would see the problem and who would pass legislation to subsidize long-term care to ease the pressure on families and increase pay for those providing care, and this would be funded by increased taxes on everyone, especially wealthy people. However, that’s not how our system works.
Can you do anything? Here are a few ideas:
Long-term care insurance is pretty cheap if you’re young, but there are a lot of limits on coverage.
Also cheap if you’re young: a single-premium deferred annuity that can increase your monthly income when you are more likely to need assistance with activities of daily living.
Keep saving money.
Be super nice to your children, grandchildren, nieces, and nephews.
Move to Mexico. When I was in Guadalajara, I met a retired American who lived there and had round-the-clock nursing care at home. He said that he couldn’t afford that if he moved back to the states.
I’d like to close with some actionable tips or hopeful words, but I don’t have any. Our long-term care system is broken, even for people who have the money. Something has to change, but what?
If you have any ideas, please share in the comments:
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This is so sobering. While my husband have saved and s/b okay, life can throw curveballs. That's one reason I'll keep working, at least for a while. The idea of having no income freaks me out.
While you can’t totally control health or the onset of dementia, you can control many of the factors. Exercise. Keep your weight in a normal range. Work your brain. Stay connected to a community. And hope you stay healthy and die at home when you’re 100. I have a 95 yo friend who is taking that approach and just got back from a six week trip to England.