If you happened to watch the seventh Democratic debate, then you may remember Bernie Sanders saying children and the elderly are our two most vulnerable populations. Regardless of your political stance, he's right. Unless you are very poor or rich, the current state of America's eldercare system will leave you behind. Who picks up the slack? Unpaid caregivers-- usually spouses, children, or other loved ones.
Family members who become caregivers are thrust into the role of caregiver regardless of whether or not they're ready. The Congressional Budget Office estimated the value of this "informal" care at approximately $234 billion for 2011, the last year calculated. Unfortunately, there's nothing informal about this care and while the government saves billions, many caregivers lose their jobs, savings, and personal health because of caregiving.
There is a major disconnect between what federal and state governments provide and what caregivers actually need. Most programs are only available to people who meet Medicaid Long Term Care qualifications, which generally means a person cannot have assets or monthly income above $2,000. See this Medicaid guide for your state's exact requirements as it does vary state by state. Although this sounds bleak, there are resources available, which I'll outline below.
Long Term Care (LTC) Insurance:
Long term care insurance pays for the cost of care in the event the policy holder needs long term care. According to a 2015 study published by Yale, however, "few Americans buy long term care insurance, and over 40 percent of long term care expenses are paid out of pocket." Despite increased awareness regarding the subject of long term care, people are still opting not to buy insurance. This may be the case for a couple of reasons.
For starters, policies must be purchased while the hopeful policyholder is healthy-- meaning years prior to any actual long term care necessity. Without a crisis, many people are understandably slow to act. Another reason many people choose not to buy LTC insurance is because they believe a family member will take care of them when the time comes. LTC insurance only covers professional care so it becomes useless if a family member steps into and maintains the role of caregiver. If, however, a family member gives care, but at some point down the road professional care is sought, LTC insurance becomes useful again. It will pay for the professional care rather than having those costs come out-of-pocket.
A major benefit of an LTC policy is that most states have partnership plans, which allow policyholders to receive Medicaid benefits while protecting assets. For example, if you bought a partnership policy with a maximum benefit payout of $155,000 and exhaust that amount, but still need care, you are able to protect $155,000 worth of assets. This is really the only way to protect assets and receive Medicaid benefits.
Direct Private Pay:
Another option is for the person in need to directly pay the family member who is providing care. This allows assets to be spent down while still remaining within the family. Since Medicaid does not allow assets to be given away you will have to write up a caregiver contract or else the money transfer will be seen as a gift. Paying for care from a family member is an acceptable way to eventually become eligible for Medicaid benefits. The caregiver must pay taxes on their earnings and the person being cared for must report the payments on their tax forms as well. Also, the rate of pay must be consistent with the average caregiver rate, anywhere from $10-$25 depending upon services provided. The rate cannot be $250/hour as a way to quickly spend down assets or else Medicaid will disqualify the person in need from future benefits.
Medicaid Cash Benefit:
Some states have begun to offer informal caregivers a cash benefit if the person they are caring for is eligible for Medicaid. In Arizona for example, informal caregivers are able to apply to become employees of Medicaid contracted home health care agencies. Once accepted, they can receive pay from the recipient's Medicaid benefits. You need to check with your local Medicaid office since it varies state by state.
As our elderly population continues to grow, hopefully lawmakers realize we need a long term solution. It isn't fair American families are forced to spend their life's savings when countries around the world have programs in place to ensure care is given to those who need it.