Americans spend more than $300 billion per year providing care for the elderly and frail. Not every senior has the same needs, however, and there is a continuum of care that runs from home care to adult day care to assisted or supervised living facilities, and ultimately to full-time skilled nursing care facilities and hospice care. The cost of an extended stay in a nursing home can run to hundreds of thousands of dollars over time.
Types of Care Providers
Senior care comes at a variety of levels. Home care is simply assistance provided in the senior's home, which can consist of basic unskilled assistance with cooking and cleaning or involve skilled nursing assistance with changing dressings or administering at home medical treatments. Adult day care is typically for more active seniors requiring a minimum of assistance in their daily activities. Assisted living facilities also provide room and board for seniors needing more assistance or for whom staying at home is not suitable. Skilled nursing facilities provide more extensive medical treatment and supervision, while hospice facilities provide palliative care in a patient's final days.
Medicare coverage for custodial care is extremely limited. Medicare covers only 100 days of care, and then only covers care immediately after a qualifying hospitalization of at least three days.
Medicare covers up to 20 days of skilled nursing care at full cost after a qualifying hospitalization of three days or more -- provided the reason for the admission to the nursing facility is the same as the admission to the hospital. After the first 20 days, Medicare pays for nursing home costs over and above $114 per day for another 80 days. Some Medicare supplement plans, or Medigap plans pick up the $114-per-day costs for the insured. After that, Medicare stops paying.
This is only a small fraction of the need for many individuals, and the average nursing home stay is 2.4 years, according to the 2004 MetLife Market Survey of Nursing Home and Health Care Costs.
Medicaid, the federally subsidized, state-run program to provide medical and nursing home care for the poor and indigent, does provide basic services. But the elderly individual must first impoverish themselves, spending assets down to their last couple of thousand dollars, depending on the state. Certain assets, such as home equity and life insurance are not counted against the senior, but the state will typically put a lien on homes and other assets to recover any Medicaid costs before assets go to heirs.
Long-Term Care Insurance
Long-term care insurance exists to cover the costs of long-term custodial care for chronic conditions. Policies typically provide up to a set daily amount, and frequently cover the costs of home care and adult day care services as well, when medically indicated. Many states have developed so-called "long-term care partnership programs." These programs will exempt a portion of your Medicaid liability provided you take out an equivalent amount in long-term care coverage. For example, to protect $250,000 in home equity for heirs, you would purchase a qualifying long-term care insurance policy providing a maximum of $250,000 in benefits.
Daily Costs of Nursing Home Care
The average cost of skilled nursing home care varies considerably by state but tends to be between $190 and $240 per day, or $69,360 to $87,000 per year. The cost of home care likewise depends on your location, but expect to pay between $16 and $23 per hour for this kind of care.