You’ve probably covered the basics, such as housing, food, taxes, emergencies, and entertainment in your financial and retirement plan. What about long-term care costs?
Long-term care is an umbrella term referring to a range of personal or health-related services that you might need for an extended amount of time. According to Genworth, an insurance company that conducts annual research on the need for and cost of long-term care, 7 out of 10 Americans will need some form of it during their lifetime. Research also shows that approximately 20% of individuals requiring long-term care will need it for five years or longer, with some needing care for much longer as the aging population increases.
While many military members assume their VA benefits or Medicaid will pay any long-term care costs, most will actually need to purchase long-term care insurance or rely on personal savings to cover the expense.
Does Everyone Need a Long-Term Care Plan?
Although long-term care is often associated with those above retirement age, anyone seriously injured by an accident or suffering a major illness might also need it. If you’re married, your financial plan should include long-term care considerations for both you and your spouse.
The most commonly used form of long-term care in the U.S. is personal care, which is designed to fill the gap for any person who is not able to accomplish one or more “activities of daily living,” defined as eating, bathing, dressing, toileting, mobility, and grooming. While plenty of personal care is delivered within the patient’s home, nursing home support might be required for more serious conditions. That support is expensive, with a semi-private room in a nursing home costing approximately $8,000 per month on average, while a private room can cost upwards of $9,500 per month.
Funding Sources for Long-Term Care
For military-affiliated patients, there are four possible sources of long-term care funding that might apply. These include VA benefits, long-term care insurance, Medicaid, and self-pay. One or more of these options might apply based on the kinds of services you need. Keep in mind that TRICARE doesn’t cover long-term care expenses and Medicare covers very few, so your financial plan must incorporate one or more of the below options.
VA Benefits for Long-Term Care
Setting up your long-term care through the VA can be complex. Long-term care services offered through the VA include comfort care, physical therapy, around-the-clock nursing or medical care, caregiver support, and daily task assistance. However, this is only available if you are covered through a VA plan and your VA medical team has determined you need one or more of these services.
Your ability to get VA long-term care is also contingent on whether or not there’s space in a nearby facility or a service provider in the local area capable of providing it. Community living centers run by the VA, non-VA community nursing homes, and state Veterans’ homes are all popular service centers for this kind of care.
One of the most important factors in determining eligibility for VA long-term care is your service-related disability status, although there are also income and asset considerations. In some cases, you do not need a disability rating to access VA care, but you must meet financial criteria. For example, veterans who qualify for the Veteran’s Pension and Survivor’s Pension program may receive assistance, though this is subject to income limits. If you qualify for VA benefits, you must exhaust these benefits before tapping into Medicaid, as VA long-term care must be used as a primary source of funding.
Long-Term Care Insurance
Coverage through private or military-related long-term care insurance policies can be very expensive. The long-term care insurance market has withstood higher-than-normal usage of many of these policies and several of these companies have folded or been acquired. Also, premiums have been going up each year on average. As of 2024, the average premium for private long-term care insurance for a 60-year-old couple is approximately $2,600 annually, or about $217 per month, depending on the selected coverage and options.
Military employees or retirees and their spouses can potentially access long-term care insurance benefits through the Federal Long-Term Care Insurance Program. Qualified relatives can also apply, including domestic partners, parents, parents-in-law and adult children.
Self-Pay
Anyone who does not yet qualify for Medicaid and who do not have access to VA benefits or long-term care insurance might use their savings to cover long-term care. This can be a major disruption to your regular financial plan or your retirement savings, particularly if you or your spouse has a substantial need for extensive long-term care.
Medicaid
To qualify for Medicaid long-term care payments, you must first exhaust other funding options, such as VA benefits or private long-term care insurance. Medicaid is considered a payer of last resort, meaning you must deplete your assets or insurance coverage before Medicaid can assist. Eligibility is subject to strict income and asset limits, which vary by state. Additionally, there are asset transfer rules, including a five-year look-back period. This means that if assets were transferred or sold for less than market value during this period, applicants may face penalties or delayed eligibility. Medicaid planning may be necessary to help protect assets and ensure timely access to long-term care benefits.
The Bottom Line:
There are plenty of factors and options to consider, but the bottom line is the same: There’s a good chance that you or your spouse will need long-term care and you’ll need to plan ahead for how you’ll cover the cost.
Incorporating long-term care into your financial plan now means peace of mind and financial security when you need it the most. Connect with your AAFMAA Wealth Management & Trust Relationship Manager, who will work with you to establish or revise your financial plan to include long-term care costs and help you reach your goals.
This article was originally published February 22, 2021.