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How to shop for long-term care services

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Many Americans have a dangerous disconnect about who pays for long-term care, and how much it costs. A personal story illustrates why it's important to understand your options for buying care -- and understanding how much it costs. 

Several years ago, my wife and I investigated available alternatives for providing long-term care to her mother. We were surprised to find a wide range of costs and quality of service. 

While it took several days to shop for her care, it was definitely time well spent: After our research was complete, we ended up moving her to a residential care facility for the elderly (RCFE) that was close by us. It offered more personalized care and was more than $1,000 less expensive per month than the assisted-living facility she had been living in.

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This story illustrates how vital it is to shop for the most appropriate care at the best cost. By doing a little legwork, you could end up saving a significant amount of money, whether you're paying for these services from your own resources or from insurance benefits.

Before looking at alternatives for long-term care services, you need to get the terminology straight:

  • Nursing homes are institutions that care for sick "patients" who need focused medical attention, 24 hours a day.
  • Assisted-living facilities have "residents" who need help with daily living activities and with medical care, but not on a 24/7 basis.
  • Adult day care centers are facilities where elders are cared for during the day, and they return home in the evening.
  • RCFEs are licensed houses in regular neighborhoods that are home to a handful of senior citizens -- typically up to six -- with a staff that takes care of them. RCFEs generally cost less than institutional nursing homes and assisted-living facilities, with the potential for a living situation that feels more like a home.

Some institutions combine features of different facilities: You may start off in the assisted-living wing, for example, and then if your health declines, move to a wing that's more like a nursing home.

Here are common alternatives for long-term care, categorized by cost:

  • No or low cost: Your spouse, family or friends pitch in and take care of you (if they're willing and able). The type of assistance you'd need and the time involved will vary widely, from just a few minutes to hours each day. Note that if friends or family do help, it's not necessarily free or even low-cost. Often spouses and other caregivers must quit their jobs or reduce their work hours to free time for caregiving.
  • Low to medium cost: Home health care is when personal care assistants, companions or home health aides periodically come to your home to help you as you need. According to Genworth's 2016 Cost of Care Survey, the national median daily rate in 2016 was $125 for licensed homemaker services and $127 for licensed home health aide services. Costs can vary widely by region, as Genworth's survey shows. In Florida, the median daily rate for licensed homemaker services was $116, but in New York it was $138 and in California it was $144.
  • Medium to high cost: Adult day care or a live-in caregiver is the solution in this category. Adult day care can work well for situations where 24/7 care isn't needed or if household members have full-time jobs and aren't able to be there all day. Genworth's survey shows the median daily rate for such an adult day care facility was $68. A live-in caregiver can work if you have a spare bedroom or two and don't mind someone living with you. You can offer room and board and a modest salary.

    Note that this last approach requires special attention to taxes on the caregiver's salary. The cost typically ranges from $700 to $3,000 per week, depending on the arrangements for room and board and the caregiver's qualifications. Another option is RCFEs. While they can cost less than assisted-living facilities, the costs and quality of care vary widely. If you're interested in this option, you'll need to shop around carefully.

  • High cost: The most expensive option is an assisted-living facility or a nursing home. Genworth's survey shows that the median monthly rate for an assisted living facility is $3,628. Again, costs depend on where one resides. In New Jersey, Genworth puts the median price of an assisted living facility at $4,950 per month, whereas in Kentucky, it's $3,300 per month.

    For a nursing home, the median monthly cost for a semiprivate room is $6,844. Multiply this rate by 12 months, and you'll spend more than $80,000 per year. At this rate, it won't take long to wipe out your retirement savings. If you have the funds or long-term care insurance, however, assisted-living facilities or nursing homes are options to consider.

It's very common to start with the low-cost alternatives and then, as your condition deteriorates, transition to the higher-cost facilities. Like anything else, there are good and bad examples of each type of long-term care provider, so you need to do your research thoroughly before making any decisions.

If you haven't needed to shop for these services yet, it's a good idea to keep this issue on your radar, so you can make informed decisions as you enter your 80s and make your preferences known to your family. It's not an exciting retirement planning task, but it's a necessary one if you want to minimize the burden on your children.

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