The Rising Costs of Long-Term Care

The costs of long-term care (LTC) continue to rise, creating potential financial risks for farmers who want to protect their farm assets for future generations. In the last two years alone, the cost of in-home care has increased by more than 20%, while nursing home costs have risen by 10% to 15%. According to the 2023 Genworth Cost of Care Survey, the following are the most recent costs of long-term care services:

• U.S., Home Health Aide: $75,552/year
• Ohio, Home Health Aide: $73,212/year
• U.S., Nursing Home – Semi-private room: $104,016/year
• Ohio, Nursing Home – Semi-private room: $100,380/year

These figures make it clear why long-term care costs are a significant risk to the continuity of the family farm.  Even a short stay in a nursing home can incur substantial costs.

According to data from the Administration for Community Living, individuals turning 65 have a 69% chance of needing some form of LTC, with an average of three years of care required. Typically, one of these three years is spent receiving at-home care provided by spouses or family members, one year in paid at-home care, and one year in a nursing facility. For farmers needing LTC, this equates to an average of approximately $180,000 in costs per person, and double that for a married couple. However, some individuals will require more than three years of care, which can cause LTC costs to increase significantly.

Medicaid can help cover LTC costs, but it has stringent eligibility requirements. One major condition is that Medicaid limits the amount of assets an individual can own and still qualify for benefits. In Ohio, an unmarried person cannot own more than $2,000 of countable assets.  Most farmers will not qualify for Medicaid without aggressive planning. Another critical factor is the five-year look-back period, during which Medicaid reviews any asset transfers made within five years of applying for coverage. If assets were gifted or transferred below market value during this period, Medicaid may impose penalties, delaying eligibility for benefits.

Given these costs, statistics, and Medicaid rules, it is crucial for farmers to explore strategies that can minimize the risk of LTC expenses depleting their farm assets. Here are some common strategies farmers can consider:

1. Gifting Assets: Transferring farm assets to family members while retaining enough to cover immediate needs can help reduce exposure to LTC costs. However, this strategy should be approached with caution, as it is subject to Medicaid’s five-year look-back period.
2. Irrevocable Trusts: Placing farm assets in an irrevocable trust can protect them from being considered in LTC cost calculations, ensuring that the farm remains intact for future generations. However, this plan is also subject to Medicaid’s five-year look-back period.
3. Self-Insurance: Farmers with significant savings or assets may choose to self-insure by setting aside funds specifically for potential LTC expenses, thereby reducing the need to sell farm assets.
4. LTC Insurance: Purchasing long-term care insurance can provide coverage for LTC costs, offering a buffer against the high expenses associated with nursing home or in-home care. However, LTC insurance can be expensive, and not everyone will qualify for coverage.
5. Wait and See: This strategy involves holding back enough assets to pay for five years of LTC while awaiting Medicaid eligibility.
6. Do Nothing: Some individuals with adequate income to cover LTC costs may not need to take action to protect assets.
7. Combining Strategies: Often, a combination of these approaches can provide the most robust protection, balancing immediate needs with the long-term preservation of farm assets.

By understanding the risks and costs of LTC and carefully considering these strategies, farmers can take proactive steps to help ensure their farm’s legacy remains intact, even in the face of unforeseen health care costs. Always consult with legal and financial advisors to tailor the best approach for your specific situation.

For more information and a detailed discussion on LTC, see The Long-Term Care and the Farm publication available at farmoffice.osu.edu.