Special Report: Long-Term Care Around the World

Part I: The Cost of Long-Term Care and How it’s Paid For

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Long-term care services, whether provided in institutions or in the community, are essential to the well-being of many elderly and non-elderly people with limitations in performing daily activities.

In the United States, long-term care is disastrously expensive. Medicare, the public health insurance system for seniors over 65 and disabled adults, only pays for medical care delivered by doctors and hospitals and, in certain cases, short-term rehabilitation which might take place in a nursing home. Medicare never pays one penny for long-term care. The Medicaid program is our country’s largest health and long-term care insurer, covering one in six Americans, including two-thirds of nursing home residents and one in five persons under 65 with chronic disabilities. Long Term Care Insurance is available, but only owned by approximately 10% of Americans due to certain issues, including rising costs, policies not being enough to cover care, and companies going out of business.

Is the U.S. approach like or unlike the systems put in place in other countries? What are other countries doing to provide — and pay for — long-term care for their aging populations? In Part 1 of this Special Report, we will look at long-term care in the U.S. and other countries. In Part 2, we will cover how America and a few other countries effectively discriminate against people with the wrong type of illness.

What Long Term Care Costs:

In a recent article, we looked at how much long-term care costs, using the latest Genworth Cost of Care Study. Nationally, in the U.S., the median cost of a semi-private nursing home room is up 2.27% to $6,844 per month. In the DC Metro area, the average cost is $10,114 per month.  That’s $121,363 per year on average! Unfortunately, according to the study’s findings, the cost of receiving care will continue to rise sharply year over year.  For the full report, see Genworth’s Website, and/or download Genworth’s Cost of Care App from iTunes.

To compare the cost of long-term care globally, let’s take a look at the median net worth of the citizens of eight countries (in U.S. dollars), how much long-term care that would cover if someone were to pay for it out-of-pocket, and how long-term care is paid for, as follows:

CountryAffordability of CareHow Long-Term Care is Paid For
United StatesMedian net worth: $44,911.
Months of nursing home care that the median net worth can cover: 3 to 4 (depending on location). Nationally, median annual private pay costs for nursing home services average 241% of an older person’s annual income. This ranges from 166% to 444% across states.
Long-term care services are financed primarily by public dollars, with the largest share financed through Medicaid, a federal/state health program available to individuals who qualify financially (generally meaning that they own almost no assets).  Long-term care services are also financed privately through out-of-pocket payments by individuals and their families, and through long-term care insurance.
ItalyMedian net worth: $138,653. Months of nursing home care that the median net worth can cover: 68Long-term care in Italy is delivered by both public and accredited private providers of health and personal social care. The health care services provided by the Italian National Health Service are free of charge, with national and local taxation as its main funding sources.
FranceMedian net worth: $141,850. Months of nursing home care that the median net worth can cover: 38France provides universal tax-funded long-term care insurance, but benefits are closely tied to income. As a result, a very poor person might get the equivalent of $1,400-a-month to pay for care, while someone earning about $50,000-a-year might receive only a few hundred dollars. As a result, in France, 11% of those 65 and older have purchased private long-term care insurance to supplement their government benefit.
CanadaMedian net worth: $90,252. Months of nursing home care that the median net worth can cover: 30Due to universal health insurance, benefits to the impoverished elderly in Canada are considerably more generous than those offered by the United States.

Fees from nursing home patients, for example, generally represent about one-third of the actual cost in either private or government homes. The balance is paid by provincial governments and community service agencies.

In Canada, there are some financial tests for government aid, but families are not required to deplete their assets to qualify. Those who are better off may be required to pay more, but rich and poor live under the same roof, eat the same meals, and go to the same social functions.

JapanMedian net worth: $110,294. Months of nursing home care that the median net worth can cover: 15In the face of massive pressure from women who were trying to hold down jobs while caring for their mothers and mothers-in-law, Japan created a national long-term care insurance program. Funded by both taxes and income-based premiums, Japanese insurance covers about 90% of the cost of care, though principally for those 65 and older.
GermanyMedian net worth: $49,370. Months of nursing home care that the median net worth can cover: 13Germany adopted a universal, national long-term care insurance system that aims to pay about half the cost of long-term care.
ChinaMedian net worth: $8,023. Months of nursing home care that the median net worth can cover: less than 2In China, there is no government provided long-term care. Essentially, all facilities for long term care are private pay. The cost (around $3,000 a month) is very high for the average worker, but within the reach of the middle and upper middle class.

With a greater number of adult women participating in the workforce, family support for older people is diminishing. Faced with this situation, cost-effective solutions for community and home-based care that enable older persons to stay at home for as long as possible are urgently needed in China.

The Chinese government is currently exploring the establishment of a government-led LTC insurance program.

United KingdomMedian net worth: $111,524. Months of nursing home care that the median net worth can cover: 31Unlike the rest of Europe, the U.K. has failed to reform its financing system in any significant way, and remains stuck in its failing welfare model, which is similar to the U.S. model.

While the elderly (and everyone else) get universal medical care through its National Health System, only the poor get government long-term care benefits. And, because this assistance varies dramatically from one local jurisdiction to another, the system is widely disparaged as the “postcode lottery.”

The U.K. has struggled to fix their system for well over a decade. High-powered commissions have recommended major reforms, but little has been done.

Please note that in countries such as Sweden, Finland, and Denmark, taxes are quite high (around 30%), but the level of services and other public spending is higher. For instance, in these countries, there is no need for medical insurance or to save up for education as all that is included in your taxes. As is elder care. Read this recent Quora article for more details.

Similarities Among Different Countries

In each country listed above, long-term care policy develops from a specific background of history, politics, resources, culture, community standards, emphasis on personal and family responsibility, and the role of government in social welfare. As times change, and populations grow, most of these countries will likely face similar challenges when it comes to providing citizens with assistance to pay for long-term care in the future.

Paying for Long-Term Care in the United States

In the U.S., Medicaid eligibility rules are extremely complex and confusing, and impossible to understand without highly experienced legal assistance. At the Farr Law Firm, we help clients find, get, and pay for the best possible long-term care while preserving and protecting their assets, including their homes, from the forced liquidation that is typically required in connection with entry into a nursing home. When needed, we complete the complex documents required for entry into a nursing home and for Medicaid.

Medicaid Planning can be started while you are still able to make legal and financial decisions, or can be initiated by an adult child acting as agent under a properly-drafted Power of Attorney, even if you are already in a nursing home or receiving other long-term care assistance.  In fact, the majority of our Life Care Planning and Medicaid Asset Protection clients come to us when nursing home care is already in place or is imminent.

If you are still healthy and not yet on the “long-term care continuum,” then instead of Life Care Planning and Medicaid Asset Protection Planning you should consider our Living Trust Plus™ Asset Protection Trust, which is a simpler and less expensive method of asset protection for clients who will most likely not need any long-term care for at least five years. For most Americans, the Living Trust Plus™ is the preferable form of asset protection trust because, for purposes of Medicaid eligibility, this type of trust is the only type of self-settled asset protection trust that allows a settlor to retain an interest in the trust while also protecting the assets from being counted by state Medicaid agencies.

As always, if you have not done Long-Term Care Planning, Estate Planning or Incapacity Planning (or had your Planning documents reviewed in the past several years), please call us to make an appointment for an initial consultation:

Fairfax Elder Law: 703-691-1888
Fredericksburg Elder Law: 540-479-1435
Rockville Elder Law: 301-519-8041
DC Elder Law: 202-587-2797

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.