To get started on your long-term care planning, here are five things that you need to know:
According to the California Partnership for Long-Term Care about half of California seniors “will spend between $94,900 for one year of care.” In 2014, the average cost for 5 years of long-term care was $474,500, and the partnership found that “nearly 12% of people will spend even more.” In high-cost living areas like San Francisco the cost of long-term care communities can be even higher, as much as $497 per day.
Think you’re in good health? About 70% of people require long-term care at some point.
Considering how expensive it is, and that the average long-term care stay is over two years, the chances are high that it will take a big chunk out of your retirement savings.
2. Long-term care includes more than just nursing homes
Although most seniors will spend some time in a long-term care facility, that isn’t the only form of long-term care. Other costs like medical care, therapy, assisted living (which may include eating, bathing, meal preparation, taking medication and other crucial daily tasks) are also vital forms of long-term care that you need to plan for. The cost of these programs can be just as expensive (and sometimes more expensive) than nursing homes.
Thankfully, the cost of nursing homes and other long-term care requirements may be covered by Medi-Cal (depending on your situation).
3. Medi-Cal includes a lot, but not everything
You have probably heard Medi-Cal mentioned before (you may have even used it yourself), but many people don’t fully understand what it is and how it can help them.
This is what you need to know: Medi-Cal provides free and affordable healthcare coverage to eligible children, disabled people, seniors, and adults with restricted income. If you are a senior then that could mean you’re eligible.
Medi-Cal includes long-term healthcare costs but also things like dental coverage, ambulatory care, mental health treatment and substance abuse treatment programs.
Medi-Cal’s dental coverage includes diagnostic and preventative dental care (cleaning, x-rays, and more), emergency services, prosthetics, and extractions. However, some people feel that the dental coverage is lacking compared to private plans, so you may need to factor in additional dental coverage as part of your long-term care planning.
It isn’t just dental care that may come up short. As great as Medi-Cal is, it does have its limitations.
According to NoLo, Medi-Cal currently only covers about 65% of nursing home residents because Medi-Cal only pays for nursing home care when it is “medically necessary.” This is defined as "when it is reasonable and necessary to protect life, to prevent significant illness or significant disability, or to alleviate severe pain." This determination can only be made by a doctor who will then ‘prescribe’ a nursing home.
There are many reasons why you may want to live in a nursing home when it is not “medically necessary”: your spouse may live in a nursing home, you may want the extra level of care to prevent an injury before it happens, or you may want the social benefits that it provides.
There are two options for individuals who wish to live in a long-term care facility but who do not meet the ‘medical necessity’ standards: pay out of pocket, or don’t live in a nursing home.
4. Planning for long-term care is complicated
Before you start planning you need to be aware of just how big the task ahead of you is. As the Medi-Cal Policy Institute says, “the long-term care system in California...is extraordinarily complex and fragmented.”
Seniors are among the largest beneficiaries of this system, but they are by no means the only ones. The system cares for a wide range of people with different needs, abilities, backgrounds, and income levels. In fact, as of May 2015 over 12 million people in California were registered for Medi-Cal (over 30% of the population).
Thankfully you don't have to navigate this complex system alone. You do however need to pick the right team to support you. Many CPAs, Certified Financial Planners®, and lawyers are unfamiliar with the ins and outs of the Medi-Cal system, and without the right knowledge you could miss out on vital treatment and financial support.
5. Medi-Cal isn’t the only option
For anyone who doesn’t qualify, or whose needs exceed their Medi-Cal benefits, the good news is that Medi-Cal isn’t the only option.
The Affordable Care Act has created a wave of new health insurance options which can be found on Covered California. Covered California provides federally subsidized health insurance to individuals and small businesses, and you can also directly apply for Medi-Cal on Covered California. An online application will quickly tell you whether or not you are eligible for Medi-Cal coverage and other financial assistance options.
You can also combine private health insurance plans with Medi-Cal. This is arguably the best option as it provides you with greater access and coverage, but it does come with a much larger price tag. Additionally, medical expenses will be billed first to your private plan.
In some cases you may also be eligible for cost avoidance/HIPP (Health Insurance Premium Payment) whereby Medi-Cal will pay for your insurance premiums.
Your final option when it comes to healthcare costs is to simply pay out of pocket, but it goes without saying that this is the most expensive and least desirable option. Still, some people may deem the extra expense worth it if they have the financial means to afford it.
At the end of the day you have to be your own healthcare advocate. That means familiarizing yourself with all the options available. At Retirement Planning Advisors, Inc. we can help you put together a long-term care plan that takes your unique health and financial circumstances into consideration. Don’t wait. Call us today for your consultation.