Mastering Aging: Takeaways from Graduate Studies in Gerontology: There Are Just Three Ways to Cover Long-Term Care Costs By Susanna P. Barton

By Susanna P.Barton

One of the single-most underscored facts professors hammer into the brains of Gerontology students is that there are just three ways to cover the ungodly expensive costs of long-term care. Here’s the gerontological thesis: 1) Out of your own pocket, 2) Via a generous long-term care insurance policy, or 3) With Medicaid, a joint federal and state program that provides health coverage to low-income individuals and families. There was a perceptible sense of urgency around these discussions in our classes, as if people weren’t knowing these facts until it’s crisis time. And that’s exactly what makes me worried about my own future and the 73 million adults who will be over the age of 65 in five short years. Of that group, 70 percent will need some kind of long-term care, a resource that can cost between $5,600 and $10,000+ a month for assisted living or nursing home arrangements or more than $30/hour for private in-home care, according to Genworth. 

Medicare does not pay for long term care.

Your private health insurance does not cover long-term care.

Only you, your long-term care insurance plan, or Medicaid pays for long term care. And that third option may not be dependably available to you in its decades-long current form.

Let’s unpack the three long-term care payment options and briefly explain their pluses and minuses, beginning with the not-so-fun option: your own pocket. Out-of-pocket payment – sometimes called self-insuring – relies on personal savings, retirement investments, home equity, or support from friends and family to cover long-term care costs. This is the most costly option for individuals and families, but also offers older adults the most flexibility in choosing providers, residential settings, such as aging-in-place care, and modifications or assisted living and other care options. If you go this route, you aren’t going to face the same kind of red tape people experience with the other two options, especially regarding program eligibility or availability.

The downside? I’ll say it again: it’s flipping expensive. Nursing home care can cost more than $150,000 a year, more for assisted living or in-home health aid services, according to Kiplinger. In-home care, especially at a 24-7 rate, can be financially crippling for many families, making a stressful situation even worse. It is not uncommon for older adults to exhaust their life savings quickly on this path, most notably when care needs last longer than expected.

For some folks, private long term care insurance offers better outcomes for covering nursing home or in-home care costs. For people in a certain financial and health situation, a generous long-term care insurance policy may be just the ticket, though garnering one is highly dependent on a person’s good health at a younger age, their financial planning aspirations, and assets. The pros include the certainty of good planning, asset protection, eligibility, and the choice of more care settings. There are also some pretty cool hybrid plans available that include a life insurance death benefit, and that may be just the ticket! But these perks come at a cost. According to the National Council on Aging, premiums for a good long term care insurance plan can cost upwards of $1,900 a year, and that’s for a 55-year-old in good health. Bottom line with this option is that long-term care insurance plans are good for some, but not for all. During the past two decades, the long-term care insurance market has sharply contracted, with the number of insurers offering traditional policies falling from more than 100 to fewer than a dozen, according to KFF Health News. 

Lastly, long-term care can be covered by Medicaid. Do you assume Medicaid doesn’t apply to you or your people? Whoa, think again. Millions of people around the country qualify for and depend on it, including people you know, love, and may be supporting one day. In 2020, KFF estimated “that 4.2 million people used Medicaid long-term services and supports (LTSS) delivered in home and community settings and 1.6 million used LTSS delivered in institutional settings.”

But it’s not an easy course to navigate. Medicaid is a federal government-funded program managed by states and measured by need that covers long-term care services for low-income individuals who meet strict asset and income eligibility requirements. While Medicaid can provide comprehensive coverage and long-term support, limitations include a five-year “look-back” period for transfers or asset sales and potential restrictions in care settings. The good news? Qualifying for and utilizing Medicaid takes the financial pressure off you and your family. The bad news is that Medicaid beneficiaries may lack access to private rooms and a choice of facilities. Also, according to AP News, experts and state officials warn that the 2025 One Big Beautiful Bill Act’s Medicaid provisions, including stricter work requirements and tighter eligibility checks, are likely to reduce enrollment and make it harder for people to access coverage, potentially resulting in millions losing coverage when the changes fully roll out in 2027. 

Lesson learned? Now is the time to start sharpening your Grand Plans for long-term care funding options one and two. How are you going to pay for your care if spending down assets and financial resources for Medicaid care qualification is no longer an option, or has different parameters? How will you receive or pay for long term care when it’s all on you or your long-term care insurance? How can you make sure you have enough money to thrive in your personal vision of senior living?

In the absence of an easy answer or perfect plan, there are three actionable steps to mitigate a one-day long-term care crisis if Medicaid isn’t part of the equation:

• Talk to a certified financial advisor and figure out exactly what you need to make or invest, or save now to achieve a financially manageable senior lifestyle that includes formal caregiving services such as skilled nursing, assisted living, or professional in-home care. Get real on the costs of these services and utilize your financial advisor’s guidance on how to pay for them all.
• Talk to a long-term care insurance agent to see if there is a plan suitable for your unique financial situation.
• Talk to your adult children, family, and friends about plans for informal care if you are unable to meet the costs of formal caregiving services as you age. If you need or want to depend on your own family for care, which is culturally the norm for millions of families around the world, that is a super fantastic plan — the superist! Just make sure you’re having honest conversations with the folks who will be involved and are aligning expectations for this most important Grand Plan.

Medicaid planning, or figuring out how to spend down to qualify for it, is legitimate thinking and makes a lot of sense given the current landscape of long-term care costs. But don’t be caught without a Plan B or C, if one day, Medicaid is no longer an option. In this increasingly crazy and exhaustingly expensive world, it behooves all of us to get real about Grand Planning. And the best way to do that is to talk seriously – no, immediately! – with financial advisors, long-term care insurance professionals, elder law attorneys, and the family/friends who may be our one-day personal caregivers, to see just what exactly our options are for the future. 

Susanna Barton, a member of Jacksonville Mayor Donna Degan’s subcommittee on elder care and a graduate of the Gerontology Master’s Program at the University of North Carolina Greensboro, has worked as a professional writer in Jacksonville for nearly 30 years and is the founder of the Grand Plans online community, podcast, newsletter, and blog.  Her book Grand Plans 2.0: How to Mitigate Geridrama in 20 Easy Steps and its accompanying workbook, the Grand Planner 2.0, are available in local stores and on Amazon. For more information, visit http://www.mygrandplans.com.