Mom, Memory Care & Money

Article by Kerry Peabody, CSA, CLTC Senior Account Executive

I stopped in to visit a new memory care community in my area yesterday. As an agent who specializes in long term care insurance, it’s important that I know what resources are out there for my clients, so I do this often. The marketing director was happy to take a few minutes to show me around. She explained that, although they just opened earlier this month, they’re already more than half full, and reservations for the remaining 30+ units are coming in quickly.

As with most new memory care or assisted living communities, it’s a very nice place. High ceilings, crown moulding, lots of pastels, nice, open living spaces, gardens, public and private dining rooms, gym, salon, etc. As part of the monthly cost, they provide three meals a day, scheduled transportation, laundry, weekly housekeeping, social programs and activities, and (this is where it stops sounding like a hotel) up to an hour of personal care services per day, with more available as needed. Their goal is to provide a secure, safe home for their residents, all of whom have memory/cognitive issues – some mild, some more severe.

“But,” you ask, “this place must be expensive?” Well, it does cost a fair amount, yes, but it’s not expensive, when you think about what you’re getting. This is a memory care community, not an apartment complex. A resident with cognitive issues can move freely around inside this community, experience all it offers, inside and out, and his or her family doesn’t have to worry about them wandering off into the forest, overdosing on medications, under-dosing, setting the kitchen on fire – or being alone and frightened. How much does all of this peace of mind cost? I’m in New England, where all LTC services are higher than in many parts of the country. In this community, a private studio apartment starts at $6,800 per month.

“But I can rent a 2-bedroom house for $1,400 a month,” you say. Sure you can – but you’re not 82-years-old with memory problems, are you?

Let’s put this in context. Mom’s 82. She owns her own home, but she’s cognitively impaired to the point where she can’t be alone. CAN’T is the key word here. You have no choice; mom needs to be safe. You live six-hundred miles away. You could hire 24/7 help for her, through a local home care agency. Companion care, here in my state, costs about $25 per hour. So, $25 per hour, 24-hours a day, 365 days a year, that totals roughly $219,000 per year, or $18,250 per month – nearly triple the cost of the studio apartment in the memory care community. Let’s cross that off of our list, shall we?

Option two? Hire a full-time, private duty nurse to live with her. Of course, he or she will want benefits, vacation time, etc. And in the event of sick day, it’ll be up to you to deal with a replacement for that day, or days. And as an employer, you’ll need to manage all the associated minutia – tax reporting, social security, etc. Unless, of course, you just hire on a 1099 basis, but then the live-in nurse will need to build in the extra cost for providing all of his or her own benefits, retirement, etc. So, again, you’re looking at, easily, $150K or more. Maybe this isn’t such a great idea, either.

Or, perhaps Mom can come and live with you. She’ll only be giving up all of her friends and the sense of independence that comes with being in her own place. You and your spouse and kids will need to adjust to having a live-in parent who needs 24/7 supervision. Between all of you, you can probably do a pretty good job of keeping an eye on her. Of course, you’ll have to secure the house at night, help with her medications, get her to appointments, etc. If you want to go on vacation you’ll either need to take her with you, find a respite care facility where she can stay, or have someone else come to keep an eye on her while you’re gone.

$6,800 per month might not be so bad, right?

Maybe now you’re leaning towards that community, but now she has to pay for it. Let’s say she has $2,000 per month of social security income. She has to come up with another $4,800 per month – a tall order.

Hopefully she has some assets, so that’ll be the first place to turn. If she has a sizable nest egg, she’ll use that – CDs, money market accounts, investments, annuities, etc. But if that runs out, what’s next?

Consider this – Mom’s moving to the memory care community full time, it’s pretty much a given that she won’t be going home, so the house – worth $250,000 – can be sold if necessary. If mom has substantial savings, you can take your time. If she doesn’t, you’ll need to get to that money fast, so you’ll sell low for $200,000. That provides enough to make up the $4,800 per month difference for about 3.5 years. But, if she outlives that, she’d be falling back on her savings – or yours – to cover the costs.

This is where some insurance planning would have made a big difference. What if, when she went into the memory care community, she’d had a long term care insurance policy that paid $4,000 per month? Now, she has her $2,000 income, and another $4,000 of LTC benefits. With that, she has just an $800 per month shortfall that she has to cover out of her savings. If her LTC policy pays for 36 months she’d only be using $28,800 of her own money to cover her share – that’s a lot better than the $172,800 she’d be paying without the insurance. This doesn’t cover everything, but it gives the family time to sell the house for what it’s worth, and it gives them time to get an attorney involved to plan for what happens when the LTC insurance runs out, if she happens to outlive it. If she had purchased that long term care policy when she was 65, it would have cost her (using today’s rates) roughly $1,400 per year. Over 17 years, she paid $23,800 in premiums, but over the three years she collects benefits, it will pay out $144,000, and it will keep her from spend her own assets on her care. But that only works if she had done her planning for this years ago, while she was still healthy.

It’s a lot to think about, isn’t it? But, the best time to start is now, so here’s some homework for you:

1) Keep watch for open houses at new memory care or assisted living communities in the area, or just call some and ask for the marketing director. Go check a few out. You’ll be quite pleasantly surprised at how nice these places are. Remember, this is a rapidly growing, extremely competitive market. If someone’s going to pay $4,000 to $7,000 a month for a studio apartment, it’s going to have to be a nice apartment. Ask them what level of care they provide. What amenities, including basic care, are included in the base rate? Can they contract for more care if needed? Can they bring in outside help if needed? Is there some level of need that would make them too disabled to stay there?

2) Talk to your parents about what they would like to have happen if they need help. Have they considered where they’d like to go if they can’t stay in their own home? What if only one of them needs care, will they both move to a community to stay together? (This is common.) Ask them what plans they’ve made. How will they pay for it? Do they have any insurance? Not an easy conversation, but one that’s easier to have now than later.

3) Start thinking about your own future plans, and ask yourself those same questions.

4) If you’re not sure about long term care insurance, in any of its current forms, find an agent in your area who really understands the products, and who can help you make an informed decision. Your plan may or may not include insurance, but you owe it to yourself and your family to make a decision based on facts. Call some local estate planning or elder law attorneys, or fee-only financial planners and ask them who their clients use for LTC insurance planning.

This is one of the hardest things you and your family will ever have to deal with, but the best approach is to tackle it proactively, now, while everyone’s as young as healthy as they’re ever going to be. Plan now, while you have options, and time. If you wait until Mom or Dad is in the middle of a crisis, you have far fewer, and much less attractive options.

Good luck! – Kerry Peabody, kKerry.Peabody@MarshMMA.com, (207) 523-2253