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Plan for Costs of Long-Term Care
People are living longer today than in the past. Today, a 60-year-old man has a remaining life expectancy of 19 or more years. A woman of the same age has a remaining life expectancy of 22 or more years. Given the potential to live a long time, many older adults and their families are concerned that the older adult will need to receive long-term care.
 Depending on the circumstances, an older adult needing care could receive that care in differing settings:
- in the older adult's home, or the home of a family member or friend,
- in a continuing care, assisted living, board and care or similar facility,
- in a hospital, or
- in a nursing home (skilled nursing facility, rehabilitation center, etc.).
Table 1: Costs and Government Help
| Care Settings |
Monthly Costs |
Gov't Help |
| Home |
$0 to $5,000, depending on the level of need and who provides the care. |
2 |
| Board and Care |
$1,400 to $3,000 |
2 |
| Hospital |
unknown |
2 |
| Nursing Home |
$5,000 average |
2 or 9 |
In Table 1, we show monthly costs and our evaluation (on a scale of 1 to 10, 10 being the best) of the level of government help available. The "9" rating for hospital care assumes that the person is covered by Medicare. Medi-Cal eligibility determines whether government help for a nursing home resident is a "2" (not eligible) or a "9" (eligible). Persons eligible for Supplemental Security Income (SSI) may qualify for higher levels of government help at home or in a board and care; SSI eligibility requires both minimal assets and low monthly income.
Meaningful government help for care is available only in a hospital or a nursing home (see Table 1). The great majority of costs of care at home or in assisted living or board and care are paid from the person's or family's income and savings.
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Focusing on Nursing Homes
Many older adults and their families are especially concerned about long-term care in a nursing home. In particular, they are concerned about the quality of living arrangements and treatment, and about the cost. Based on the best projection available to us, approximately 43% of the older adults age 65 or older will need nursing home care at some time (one of every three men; one of every two women).
Nursing Home Care Cost
According to the California Department of Health Services, the official average monthly private pay cost of nursing home care in California is $5,031 (2006 official figure). This amounts to more than $60,000 per year. Clearly, nursing home care for an extended period could be a costly matter.
Paying Nursing Home Costs
There are three principal sources for paying for nursing home care: personal resources, insurance coverages and government-related programs.
Personal Resources: An older adult with sufficient personal resources could cover the cost of nursing home care from his or her available funds. According to AARP, consumers age 65 and older pay over 20% of nursing home costs themselves.
Private Health Insurance: Private health (medical) insurance normally specifically excludes nursing home care. There are exceptions, however, where some amount of coverage is included in an older health insurance policy (check benefits departments and descriptions from past employers, unions, etc.).
Private Long-Term Care Insurance: An older adult could cover nursing home care costs by purchasing adequate long-term care insurance. In exchange for ongoing premiums, the insurance company promises to provide an amount of money each month for nursing home care costs. Policies may also provide coverage for care at home, assisted living and in other settings. Its availability to an older adult will depend on the older adult's physical condition at the time of applying for the insurance.
The coverages provided by these policies vary, and must be reviewed carefully. Items to investigate include premiums, types of care covered, what triggers benefit payments, daily benefit amounts, inflation protection, duration of benefits, and nonforfeiture and waiver of premium protection. It is important to obtain coverage that is guaranteed renewable.
Whether an older adult should purchase this insurance involves several considerations. The older adult should consider the size of the premiums, and the ability to pay them. Also consider the potential costs that the insurance will cover, the level of the older adult's financial reserves, and the extent to which the older adult desires to preserve those reserves for other purposes. Also consider the potential availability of the Medi-Cal program, and the older adult's feelings about using that program.
Medicare, Medicare Supplements, and HMOs: According to AARP, Medicare pays over 15% of nursing home care costs for consumers age 65 and older. We note that the maximum number of days of Medicare payment for nursing home care is 100 (with a co-pay of $119 starting on day 21). Medicare supplemental (Medigap) coverage and HMOs generally cover only the items that Medicare covers.
Medi-Cal (Federal Medicaid):
Medi-Cal is California's version of the Federal Medicaid program. For eligible persons, Medi-Cal can pay a significant portion of the cost of nursing home care. Medicaid pays more than half of nursing home costs for residents age 65 or older.
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