How Long-Term Care Can Lead To Bankruptcy

As the US population ages, long-term care has become a serious financial consideration for many households. In some cases, people may have underestimated just how expensive long-term care can be, leaving them unprepared as parents age and are no longer able to be in their own homes. In other cases, families believed that aging parents were covered by long-term care insurance, only to find that they do not meet the specific criteria outlined by the policy. The costs of long-term care can be debilitating for a family’s personal finances, and can even lead to bankruptcy.
If you’re facing debt that you can’t pay due to the high cost of medical care, contact Sirody & Associates for a free consultation.

Rising Tide Of Costs

By 2050, there will be approximately 88 million adults over the age of 65 in the United States. Nearly 70 percent of them will need some level of long-term care. During this same time period, the number of adults over age 85 is expected to nearly quadruple. The medical costs for this group of older adults and their families is expected to be very high. Many of these seniors will need some level of long-term nursing care, whether it is at home, in an assisted living community or in a skilled nursing facility. In addition to these costs, families may need to cover co-pays for medication, meals, physical therapy and special medical equipment such as a walker or an adjustable bed.

National Health Crisis

Medicaid covers the cost of nursing facilities, but only for individuals who meet the program’s strict asset and income guidelines. In 2015, 39% of nursing home stays in the state of Maryland were not covered by Medicaid. Families who do not qualify for Medicaid, may assume that Medicare will pick up the tab for an assisted living stay. Unfortunately, Medicare only pays for up to 100 days of skilled nursing care per illness, and then families must pay out-of-pocket for any remaining long-term care. In 2011, about $45.5 billion or 21.5 percent of all long-term care costs were paid directly by individuals and families.
When a senior’s health deteriorates to the point that they must move to a nursing facility, often it’s their children who are left struggling to pay the bills. These children, likely in their 40s and 50s, are usually already stretched financially – with mortgages, retirement savings and college costs for their own children. In some cases, families feel like they must choose between providing for their parents and providing for their children. Most US families simply don’t have enough additional disposable cash on hand to cover the costs of long-term care. Consider these average costs from 2016:

• Nursing home stay = $82,128/year
• Assisted living care = $43,536/year
• Home care fee = $20.50/hour

Relying On Insurance

The majority of US families can’t afford the high costs of long-term care out of pocket, but have incomes or assets that are too high to qualify for Medicaid. In cases where people don’t qualify for government aid to help pay for long-term care expenses, families generally resort to tapping into personal income or savings to cover the cost or sometimes take out a home equity loan or other personal loan.
Some people have the foresight to purchase long-term care insurance long before they need it when the rates are lower. But those who wait too long to obtain insurance may find that the rates are very high, and/or that that they now have a pre-existing condition that isn’t covered. However, it’s important to also realize that long-term care insurance policies vary widely and are filled with fine print. Often families with long-term care insurance believe a nursing home stay will be fully covered if Mom or Dad require it, only to find out that they don’t qualify based on the policy’s conditions, exclusions, or benefit limits. In cases like this, the nursing home stay becomes a large, unplanned medical expense – similar to an unexpected surgery.

When Families Can’t Pay

According to the Kaiser Family Foundation, nearly one-third of Americans struggle to pay their medical bills even if they have health insurance. It comes as no surprise then, that overwhelming medical costs are the leading cause of bankruptcy in the US. These types of expenses are generally unplanned and involuntary, and can come at a time when families are struggling with other significant expenses such as mortgages, car loans and college savings. It’s understandable that many families simply can’t cover the cost of long-term care for a loved one.
For families struggling with snowballing medical debt associated with long-term care or other medical expenses, bankruptcy may be a viable option. Bankruptcy is a legal process that allows an individual to resolve their debts – even those associated with long-term care expenses and other medical costs. Bankruptcy can help families who are drowning in medical debt get their finances back in order.
If you are feeling overwhelmed by growing debt associated with long-term care costs, Contact Sirody & Associates for a free consultation.