Long-term care is one of the largest expenses you may face as you get older, and it’s one of Medicare’s biggest gaps. Medicare pays for limited stays in skilled nursing facilities — for example, if you have a hip replacement and need inpatient physical therapy for several weeks. But it generally doesn’t pay for nursing home costs if you primarily need help with the activities of daily living, such as bathing, dressing and eating.
Long-term care costs can add up quickly: The median cost of a private room in a nursing home is now more than $108,000, according to the 2021 Genworth Cost of Care Study. The median cost of a year in an assisted living facility or 40 hours a week of home care is about $55,000.
The fix: A long-term care insurance policy can help cover these expenses for some people. This type of policy can help pay for care in an assisted living facility, nursing home or your own home.
To qualify for benefits, you usually need help with two out of six activities of daily living, such as bathing, dressing or eating, or evidence of cognitive impairment. However, it can be difficult to qualify for long-term care insurance, particularly if you already have health issues, and the premiums for these policies have been rising over the past several years.
Another option: Buy a policy that combines long-term care and life insurance, though the price can be steep. This type of policy pays your heirs a death benefit if you don’t need long-term care.
Also an option: Medicaid, a joint federal-state program that provides health coverage for people with low incomes, may pay for these costs if you meet the asset and income requirements and have very little savings. If you qualify, you may be required to use certain Medicaid-eligible facilities.
No matter how you decide to cover these potential expenses, it’s important to consider the costs in your retirement planning.