The cost of quality care for an aging loved one can get pricey. If your loved one has dementia or Alzheimer’s, the costs go even higher. Although the average lifetime cost of long-term care comes in around $138,000 per individual, Brandon Gaines, a wealth management advisor at Northwestern Mutual, tells Care.com that 15% percent of seniors can expect to spend more than $250,000. The average lifetime cost of care for a person with Alzheimer’s in 2018 (when the most recent data was recorded) was $350,174, according to the Alzheimer’s Association.
Nonetheless, few individuals with Alzheimer’s or dementia have long-term care insurance that’s sufficient to cover services nor can they afford to pay for long-term care out of pocket, according to a 2020 Alzheimer’s Association report.
That said, it’s essential to familiarize yourself with the types of care you might be considering for your loved one, as well as ways to pay for it, says Gaines. Depending on when they started planning, your senior loved one might not have known that they would need to budget for Alzheimer’s- or dementia-specific care. You may be diving into this research because you or a loved one has a new diagnosis. But rest assured, there are options no matter where you are in the timeline.
Here, Gaines and other financial advisors explain Alzheimer’s and dementia care options, as well as payment strategies to consider.
Types of Alzheimer’s and dementia care
What it is: It’s estimated that 70% of adults with Alzheimer’s or dementia live at home or with a loved one, and the majority of their care falls under unpaid help from family or friends, according to a 2019 Alzheimer’s Association report. However, some receive personal and medical professional assistance at home. This includes home health aides who help with tasks like getting dressed, cooking or bathing, as well as professionals who can provide physical therapy and other skilled services.
If you’re considering this route, you also need to think about whether your loved one’s “current home is safe and the right place for them to age in place” — as well as the costs associated with this.
What it costs: “The costs depend on what type of care you have in your home,” says Gaines. “Home health aides average just under $23 an hour, but skilled care costs significantly more, averaging from $131 per hour for a practical nurse to $139 per hour for a registered nurse.”
The average weekly cost for a non-medical home health aid is $1,012, and 32% of those using these home health services are Alzheimer’s or dementia patients, according to the Alzheimer’s Association’s latest data.
Marguerita Cheng, certified financial planner and Chief Executive Officer of Blue Ocean Global Wealth, has found that while most people prefer to receive care in the comfort of their home, some don’t realize that in addition to an hourly cost, many home caregivers have a required minimum.
Read more: The Complete Guide to Home Care
Adult day care
What it is: This type of care takes place outside of the home for those who only need it during the day and provides help with medication, as well as time to socialize with others. About 31%, according to the 2019 Alzheimer’s Association report, of those enrolled in these day services have Alzheimer’s or dementia. On average, 69% of adult day care providers offer specific programs for those with Alzheimer’s or dementia.
What it costs: “Costs range depending on state and whether or not medical services are needed,” explains Gaines. “For reference, the social model [which doesn’t account for medical care] averages $82 per day while the medical model averages about $90 per day.”
It also bears noting that the cost of services has increased 2.9% annually over the last five years, according to the Alzheimer’s Association.
Assisted living facilities
What it is: Individuals with Alzheimer’s and dementia, especially in earlier stages, may opt to move into a senior community that offers some level of assistance with daily activities, such as cooking, laundry, medical services, social activities and exercise programs, while maintaining some independence.
What it costs: On average, 42% of assisted living residents have Alzheimer’s or dementia, and the median cost is $4,051 per month or $48,612 per year, according to the Alzheimer’s Association. “These costs range depending on what kind of apartment style you prefer and where you live in the country,” explains Gaines. “For example, New Jersey will be more expensive than North Dakota. On average, assisted living facilities could cost nearly $58,000 per year.”
Senior living facilities
What it is: These full-time, live-in senior communities can be a good option for those who need round-the-clock personal and medical assistance. In 2014, 50% of nursing home residents had Alzheimer’s or dementia, and 61% had “moderate or severe” cognitive impairment, according to the 2019 Alzheimer’s Association report.
What it costs: The average cost for a private room is $280 per day or $102,200 per year. For a semi-private room, the average cost is $247 per day, or $90,155 per year, and this has increased 3.1% annually over the last five years, notes the Alzheimer’s Association.
“The average costs per year can run about $89,000 to $103,000 for a semi-private or private room,” says Gaines.
Options to pay for Alzheimer’s and dementia care
According to the 2019 Genworth Cost of Care Survey, prices for both in-home and facility long-term care are skyrocketing, which is making paying for it more challenging.
That said, if you have the luxury of planning well in advance of a loved one’s diagnosis, meeting with an experienced financial advisor can help prepare you for long-term care expenses, immediately and down the road, including home and hospice care. They can help you map out an overall financial plan and help you make the best informed decision for your situation.
Suzanna Lam, a certified public account and retirement specialist, says her father-in-law suffers from dementia but did not invest in long-term care before his diagnosis. Due to this, his children pay $4,000 a month in cash to cover in-home care 12 hours a day. “Due to lack of financial education, none of his six professional children knew about long-term care insurance and how the costs would impact them financially until it hit them,” she says.
Here are payment options that can make it an easier pill to swallow.
Long-term care or life insurance
What it is: The Alzheimer’s Association found that in 2014, an estimated 7.2 million Americans had long-term care insurance, which typically assists with costs of care in a nursing home, assisted living facility or in-home services. Seniors who have long-term care policies may receive either a daily or monthly benefit, explains Cheng.
According to Genworth, the average cost of long-term care insurance varies by state and the benefits you choose, and Cheng notes that some policies may have the same level of benefit for at-home care versus care at a facility.
Note that seniors with cash value life insurance may have options to help pay for long-term care or even exchange the policy in the future to create more flexibility. There may also be options to pay for long-term care on a tax-favored basis, says Gaines.
Details to consider: Once a patient is diagnosed with Alzheimer’s, they are no longer eligible to enroll in long-term care insurance and not all existing policies cover it.
Also, people who apply for long-term care insurance have to undergo a medical exam and may be denied coverage based on current medical conditions or past health history. That’s why, according to the American Association for Long-Term Care Insurance, the best age to buy long-term care insurance is in your mid-50s, and if you’re in good health, you may be able to access a discount on premiums.
Health Savings Accounts (HSAs) and Dependent Care Accounts
What they are: If you’re employed by a company that offers them, HSAs help you save money on qualified medical expenses by allowing you to contribute pre-tax dollars. If you have an HSA, you can use these contributions to pay for long-term care.
And a Dependent Care Account is another type of flexible spending account that may be part of your employee benefits. “People typically use these plans for child care, but you may be able to set aside some dollars on a pre-tax basis to cover the cost of care for a loved one,” says Cheng.
Details to consider: Gaines notes that there are restrictions and limits to using these vehicles to cover long-term care costs. “A quality financial professional can provide more information about what’s best for your unique financial situation and potential long-term care needs,” he says.
State and government assistance
What it is: Medicaid is a combined state and federal program for low-income individuals and families. “If you or a loved one doesn’t have the financial capacity to pay for long-term care, there are Medicaid programs that can help family members with some expenses, depending on income and assets of an individual,” says Gaines.
According to the Alzheimer’s Association, Medicaid is the only public program that pays for long-term nursing home stays that most patients with dementia require as the illness progresses. Of those with Alzheimer’s or dementia who have Medicare, 27% also have Medicaid and the annual average Medicaid payment comes to $8,779 per person.
Details to consider: “Medicaid lacks flexibility and could potentially force the family to make decisions without very much optionality,” says Gaines. It is also not “free,” as it usually requires a forced spend down of assets by the individual to qualify and differs in criteria from state to state.
Lam adds, “A lot of people do start transferring assets they own to their children years before they need Medicaid services as they related to long-term care as part of their estate planning strategy, however, the one thing most of them don’t take into account is the quality of care,” she warns. “The workers working at these Medicaid-sponsored facilities are often overworked and they’re on a clock. So more often than not, they may forget to change a diaper. The patient can be quite lonely lying there or sitting there with a TV on all day long.”
A note on Medicare: This federal government health insurance program helps pay for some health care costs for people 65 and older. However, it does not cover long-term care costs or associated expenses.
In fact, Medicare beneficiaries age 65 and older with Alzheimer’s or dementia paid out-of-pocket an average of $11,068 for long‐term health care services that aren’t covered, according to the Alzheimer’s Association.
Assistance for veterans
What it is: Veterans with Alzheimer’s or dementia can receive care through the United States Department of Veterans Affairs. This includes home care, adult health care, nursing home, hospice care and more.
Details to consider: Cheng notes that although the VA offers these special resources for vets, families should be aware that the waiting list can be long.
Real estate and property
A reverse mortgage
What it is: Opting for a reverse mortgage allows seniors to convert part of their homeownership value into cash, which can then be used for expenses including long-term care. “This option is often written off without giving it serious consideration,” said Gaines. “Although it’s not recommended for everyone, a reverse mortgage could provide supplemental income.”
Details to consider: Gaines says this option should be considered within a larger scope financial plan.
What it is: Without insurance, Medicaid or another option in play, you might simply pay outright for care services.
“We pay for the care by cash instead of sending him to an adult day care or assisted living facility because we feel he would have better quality care at home,” Lam says of the out-of-pocket costs her family pays for her father-in-law’s care.
Details to consider: Depending on what form of care you opt for, ou-of-pocket expenses can run you as much as a few thousand dollars per month, says Lam.
Additional tips on paying for Alzheimer’s and dementia care
Start having the conversation as early as possible. “The sooner you start planning, the more choice you have,” Cheng notes. “I know this isn’t an easy conversation. I am so grateful and appreciative that my parents were receptive to being proactive and planning.”
Work with a trusted professional. It is important to find a financial advisor who is willing to work with you, your elder care attorney and your loved one,” says J. Kenyon Lang, a Managing Partner with Cambium Group, LLC and a financial advisor with Park Avenue Securities. “As one enters dementia, they often will not be able to make sound decisions,” reminds Lang The financial professional will have to work with your power of attorney to make sure that all wishes are carried out.”
Consider the full picture. Cheng says that in addition to assistance, you’ll also need to potentially budget for respite care, equipment and potential house remodeling or outfitting should your loved one opt to remain at home.
Don’t be afraid to ask questions to try and explore all possible options. “I worked with the home care health agency and long-term care insurance company to assign benefits so that my mom didn’t have to liquidate assets, write checks, submit paperwork and then get reimbursed,” says Cheng.