What can healthcare cost as one gets older? How on earth do you plan for it?

The amount of money required to pay for future healthcare is pretty difficult to predict. When you add potential costs for long-term care any estimates become even more challenging. As a family member concerned about the care of a parent or spouse in the final decades of their lives, healthcare expenses are probably one of your biggest worries. Will there be enough money to cover the costs of care?

Many people make the assumption that if they have Medicare they will be covered for anything and everything that might happen. But that isn’t true. First there are all the variations of Medicare coverage. Standard Medicare Parts A & B plus a Medicare Prescription Drug Plan, Part D. Then the variations in Medicare Supplements to cover things that aren’t covered completely by Medicare. Or, the use of a Medicare Advantage (HMO) plan. The Medicare Advantage Plan may put all the pieces together in a simpler and possibly less expensive way.

But, and there are a few buts. Any of the selected options for Supplements or Medicare Advantage plans may have restrictions such as use of a defined provider panel, or deductibles and co-pays. They may also have eligibility screening so choices may need to be made before serious illness or significant on-going health care needs and expenses. Once a person is experiencing a decline in health it can be difficult, or at least expensive, to change coverage.

Getting advice is important. Www.medicare.gov is helpful for comparing benefits and cost projections. Also many communities have counselors at offices for aging or at aging and disability centers who can help work through an individual’s circumstances.

Once the package of Medicare services and all its parts are sorted out many people think their work is done. Keep in mind that plan coverage, including such things as drug formularies can change every year. It is prudent to review coverage and costs every fall during open enrollment.

But so far this still leaves out long term care and its potential costs.

In years past I have reviewed data that showed that perhaps three out of four people will need long-term care services at some time during their life. Recently I received a copy of a new report commissioned by Vanguard citing data that shows about half of people who are 65 years old will never need long-term care. But about one in seven people will need at least some long-term care for two years or more. That could mean care at home or participation at an adult day care center, or it could mean nursing home care.

The range in costs for long-term care is tremendous. For those who need extensive long-term care this could become more than $250 thousand in lifetime costs. If this includes nursing home care this will cost about $85,000 per year according to Health and Human Services. Keep in mind that the costs for long-term care vary widely across the country. For example a semi-private nursing home might cost more than $140 thousand in New York but only fifty-eight in Texas.

Not surprising the annual costs for long-term care increase as individuals get older. At the same time spending for other non-healthcare related expenses goes down as people get older. No more travel costs and perhaps no more housing cost. Since women typically live a bit longer than men it is no surprise that women will need more care in the last years of their lives than men. And a higher percent of men will never require long-term care at all.

More than half of the costs for long-term care services are paid privately out-of-pocket. A small percent of the population has long-term care insurance that will cover these expenses and those without means will rely on Medicaid. Just over one-third of long-term care is paid by Medicaid. If assets are depleted and care is needed Medicaid may be the best alternative. Each state has different rules and requirements for Medicaid so learning about these can be helpful.

If predicting annual costs for health care is difficult, then predicting the lifetime cost for healthcare and long-term care feels like a shot in the dark. Do you plan for nothing, a quarter of a million or somewhere in between? As the first step it is helpful to be informed. You now know more than the majority of older adults about the costs for potential future care needs. Understanding your parents financial situation and consulting with their financial advisor will help you and your parents make informed decisions to prepare for these expenses.

What else can you do to plan? First, start with family. Most long-term care support is provided by family members with caregivers providing an average of 24 hours of care each week. The first question is whether there are people who are able to step in to provide care that is needed to help someone remain in their home. If so, you can prepare to engage family members.

This also brings me back to thinking about health care choices and life choices. The most critical question being: Are decisions being made for care of an older adult in the last years of life the care they want? It is easy to agree to proposed treatment plans that can include expensive and potentially difficult medical treatments. If the person is over 85 and frail, allowing the person to make the choice not to do something that is proposed is often the right thing to do.

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