Navigating Assistance with Funding Caregiving

If you have passed or are approaching your middle-age years, the idea of caregiving may be something prominent in your mind. You may be caring for or have coordinated care for an aging relative, or perhaps you have gotten to the point where it is more challenging for you to live independently. The fact is that our health system has advanced to where people are able to be treated in order to live longer, but the system has not figured out how to keep aging bodies from breaking down. It is a natural evolution that as you advance in years, there is a higher chance that your health is going to decline, and as a result of that, you may need assistance to manage the things you’ve been accustomed to doing on your own. In past generations, it was common, if not expected, that family members would shoulder the responsibility of caring for their loved ones, whether they had training in doing so or not. However, in those generations, the duration of someone’s caregiving needs tended to be more limited. With advances in medicine, those durations have become longer, and often the family that would be expected to provide care may not have the available time or capacity to handle it on their own. Therefore, many people have begun to lean on the caregiving industry to bridge the gap, but that leads to another challenge for those involved: paying for those services. There is a great deal of information available to those in the market for caregiving, but people don’t always fully understand their options and the pros and cons of the choices they may make. So, in this issue of the newsletter, we will discuss strategies you can employ to address caregiving needs in a way that can meet your needs and hopefully allow your financial plan to remain on track.



Understanding How You Can Meet Your Care Needs
Of the many ways you can provide care, perhaps the most common are: relying on volunteer help (usually from family and friends), engaging professional caregivers for in-home care, and outsourcing care to a facility. The decision on which route to take is often determined by the health of the person needing care and the financial capacity of that person or their loved ones. Also, it is common that a person’s health may shift over time such that their needs lend themselves to more than one of those approaches. In terms of cost, the volunteer route obviously has little direct cost, although there may be hidden costs that caregivers may not even realize, such as the cost of using their time, costs associated with transportation, and utilities, to name a few. Beyond that, whether care is provided in-home or at a facility, there is clearly going to be cost associated with the services provided, so it is easier to quantify what those costs will be, even if those costs are outside of what you may feel comfortable paying. One reason for the volunteer approach, outside of financial requirements, is that families are sometimes reluctant to place their loved ones in the hands of outside caregivers, but it is impossible to discount the potential cost of engaging outside caregiving services. If the person needing care or their loved ones who may end up covering the costs have not prepared for this need financially, the cost of care can place a significant financial burden on everyone involved.

Self-Paying for Care
Because caregiving tends to run a spectrum as time goes on, many caregiving situations start with more limited needs that can be managed by volunteers, but as the needs progress, there is often a need to pay for care services, and that can weigh heavily in the decision-making. If you want to have full flexibility in your options, self-paid care provides you with that, assuming you have the income and/or assets to pay for the associated costs. Whether the costs are small or great, when you are paying out of your own pocket, you get to decide how much care will be delivered and how it will be delivered. Since no other entity is involved in care decision-making, the choices are yours. If you are able to self-pay, you don’t have to adhere to external requirements for the type of care you can request; however, with that flexibility comes the need to carry the full financial responsibility, and the reality is that many individuals and families do not have the financial capacity to cover the level of cost that may be required.

Using Insurance and Other Protections to Pay for Care
If caregiving needs can no longer be managed with the use of volunteer help and self-pay is not financially feasible, you still have options, but those options come with some strings attached. Years ago, traditional long-term care insurance was gaining traction as a strategy, allowing you to pay a relatively smaller premium (albeit one that was not cheap) to an insurance company so they would be responsible for the cost of care up to the limits of the contract. However, in recent years, due to the increases in cost of care, many insurers have left the traditional long-term care insurance market, and with the limited number of players, the cost of premiums have increased even further. With that situation, alternative approaches to care protection have become more popular, primarily the use of life insurance riders/enhancements, annuities, a combination of the two, or asset-based protection through the use of annuities with enhanced benefits. A key attraction to these approaches is that the base contract can stand on its own as an asset or protection strategy, but it has the additional benefit of providing for the contingency of needing financial support for caregiving needs. Still for each of these solutions, you will need either a lump sum of money to fund it or the income to pay ongoing premiums. If you cannot meet those requirements, another option is the use of the government’s Medicaid system that can pay for caregiving needs; however, in order to qualify for Medicaid services, you are required to have spent down the vast majority of your financial assets and also must meet income requirements based on your family size. Qualifying for Medicaid means adhering to the rules of the Federal government, and to financially qualify, there is a lookback period of 5 years, so planning for its use requires some advanced planning. With Medicaid, some states also impose asset recovery to in essence get back some portion of what was paid for on behalf of the care recipient. There are legal structures in the form of a specific type of trust that you can use to aid in lowering your countable wealth and protecting your property from asset recovery. Sometimes people consider the use of Medicaid as the first option and look at ways to structure their finances in order to qualify, not realizing that they may be limiting their options in doing so and perhaps even losing the ability to pass along wealth they wanted to leave to others.

Addressing caregiving needs is often both emotionally and financially challenging, and because of the many layers involved in it, you should take the time to plan for it, preferably well in advance of needing it. If you can take a thoughtful and comprehensive approach with it, it can make what is always going to be a difficult situation easier for everyone to handle.