Your Children Could be Forced to Pay for Your Care

I recently read an article in Investment News from their June 6, 2016 edition that was titled: “Children on hook for long-term care” and it was sobering. As a Wealth Manager, planning for the possibility of staying in a nursing home or needing home care is something I address with all my clients.  However, the cost of getting long term care insurance or insurance hybrid products has gone up considerably over my 18 year career.  This makes sense as the cost of skilled care has risen dramatically.  In fact, if you want to see how much care is in your area (and be sitting down when you do), then go to this website:

Genworth (one of the largest insurance companies in the long term care market) generates the above data through an annual survey of long term care costs. For example, if I plug in San Jose, CA, then I can see that the average semi-private nursing home room now costs $9,901 a month and homemaker services are in the mid $5,000’s per month.  When you consider that 1 in 3 Americans have no money saved for retirement and 56% of Americans  have less than $10,000 saved for retirement, those costs highlight the fact that the government will have to step in and do something. (source: “1 in 3 Americans Has Saved $0 for Retirement).  Currently, the government steps in via the Medicaid system, which is basically welfare.  If someone goes into a Medicaid approved nursing home, then runs out of money, then the government steps in and pays the nursing home a pre-arranged fee, which is much less than what the nursing home was getting before.  So the nursing home makes up for the lower income by charging more to people who come in with their own money.  I saw this happen in San Jose, CA with my father.  His rates went up dramatically over two years as the nursing home struggled to keep up with costs due to the increasing number of patients on Medicaid.  Normally, the state has the right to try and reclaim what they paid out for care after the death of the individual.  So they can go after the house, car, whatever assets are left to recoup the cost of care.  But that was as far as it ever went…  If there weren’t any assets left, then that was it.  The state just took a loss and moved on.  But that may change…

It may change due to what are known as ‘filial responsibility laws’, which are on the books in about 30 states. These laws have the potential power to hold children responsible for long term care expenses, like nursing homes, should a parent requiring care not be able to pay for it.  Currently, these laws are rarely enforced, but what do you think will happen when more people flood the nursing homes with no money and the state has to pay for it?  I personally think these laws could be enforced and enforced harshly.  The article mentions a recent case in 2012 between Health Care & Retirement Corp. of America v. Pittas.  In that specific case, the defendant was found responsible for his mother’s long term care bill from a skilled nursing facility, to the tune of $93,000!!

This article was a strong wake up call for me because I have been seeing the trend of increasing nursing home costs, an older American population that hasn’t saved enough for retirement, and state budgets getting more and more constrained. It is only natural that something had to give and more responsibility be pushed back to the individual.  Whether that responsibility comes in the form of enforcing or creating ‘filial responsibility laws’ or increasing taxes or both doesn’t really matter.  What does matter is that you make yourself aware of the problem and create a plan to deal with it.  Maybe you purchase some type of long term care insurance? Maybe you set aside a large chunk of investments to self-insure? Maybe you talk with your kids and everyone pitches in to pay a premium?  I just urge whoever is reading this to do something and have a discussion.

And if you are curious, here are the list of states that currently have these laws in place:

States Currently with Filial Responsibility Laws

AlaskaKentuckyNew JerseyTennessee
ArkansasLouisianaNorth CarolinaUtah
CaliforniaMarylandNorth DakotaVermont
DelawareMississippiOregonWest Virginia
GeorgiaMontanaPennsylvaniaPuerto Rico
IndianaNevadaRhode Island
IowaNew HampshireSouth Dakota