According to industry research, just a few years ago, long-term care insurance (LTCI) cost Americans over $2,700 each per year. It’s no wonder that more and more Americans are choosing not to buy LTCI.
In 2017, a study conducted by the Harris Poll found that 75 percent of 2,065 study participants didn’t have LTCI, and 53 percent of those who didn’t have it reported prohibitive costs as the reason why they weren’t buying it.
So how do you pay for long-term care without insurance?
What is the cost of long-term care?
Costs of long-term care depend on several factors: The amount of time you need care, the type of care you need, the care provider you need, and where you live.
The U.S. Department of Health and Human Services reports that, on average, the costs of care for a nursing home are $225 per day ($6,844 per month) for a semiprivate room or $253 per day ($7,698) per month for a private room.
Care costs are cheaper at assisted living facilities: A one-bedroom unit costs on average $119 per day ($3,628 per month). And costs for at-home care average $20.50 per hour for a home health aide or $20 per hour for homemaker services.
Is it worth it to buy long-term care insurance?
If you can afford LTCI, it’s well worth the cost for three reasons:
- It can help protect retirement nest eggs from long-term care costs.
- It relieves the burden of care from your family and friends.
- Loved ones receiving LTCI benefits get to choose where they want long-term care and how they get it.
Should you use an HSA for long-term care?
If you have a high-deductible health insurance (HDHI) policy (a health insurance policy that requires you to pay higher deductibles in exchange for lower premiums), you can open a health savings account.
An HSA is designed to help you pay for qualified medical expenses, as well as your insurance deductibles and copayments.
You and your employer (if you have HDHI through your employer) can make tax-free contributions to the account, and you can make tax-free withdrawals from the account as long as you use withdrawals to pay for qualified medical expenses. Your money grows tax-free, too.
Qualified long-term care costs, and even LTCI premiums, are included in the HSA list of qualified medical expenses, making an HSA for long-term care a wise financial strategy.
Pro tip! You can use an HSA to pay for LTCI premiums, home care, special homes for the intellectually or developmentally disabled, general long-term care, nursing homes and services, and disabled dependent care expenses.
While you can use an HSA to help soak up some of the costs of long-term care, LTCI will offer you more coverage, but you may never end up using LTCI coverage, meaning thousands of dollars lost. You don’t lose the money you invest in your HSA.
If you have an HDHI, consider combining an HSA with LTCI for maximum long-term care coverage. You can use an HSA to pay LTCI premiums and any qualified long-term care expenses you need to pay for during your LTCI elimination period. (An elimination period is the length of time when you must front the costs of long-term care before your insurer starts paying.)
The bottom line
You can pay for long-term care without LTCI while protecting your retirement assets with an HSA. Head over to this article to learn more about paying for long-term care.
