First, the problem: HHS says that once we reach 65, we have a 70% chance of needing Long Term Care (LTC). One in seven will need care for more than 5 years. If you pay for such care, expect to spend more than $265,000 on it, according to the Office of the Assistant Secretary for Planning and Evaluation (part of HHS in Washington).
Many people think that Medicare pays for LTC. Medicare is only health insurance, and does not pay for LTC. It can seem confusing, however, when Medicare pays for a short stay in a nursing home. Medicare will pay for that, following a 3 day hospitalization, while you are actively getting better and making progress towards recovery, because it is far less expensive to recover in a nursing home bed versus the far more expensive hospital bed. The typical time for such care is only 2 to 3 weeks.
Medicaid will pay for LTC, but only once you are impoverished. A single person must spend all assets down to below $2000, cash in life insurance, and give up all income over $45/month to qualify. It is not a solution, it is welfare with nothing left over for heirs except your funeral bill.
Perhaps some people can move in with family, but many people have limited choices there with both husbands and wives working to make their mortgage payments and other bills with no extra funds or time to care for elderly family members.
Medicaid is, however, the solution for those with no other means of paying for the care they need. LTC insurance is another option, for those with the health to be able to purchase it, and the funds to pay the bills. In most cases, it is not as expensive as people fear, if the appropriate coverage is chosen with the help of an expert in this field.
Lastly, Medicaid does allow setting aside up to $15,000 (varies by state) for final funeral expenses, if the funds are placed in an irrevocable trust. The funds in this trust are available immediately, even before the death certificate is prepared, to pay the full cost of funeral arrangements so the children are not left with this bill.
There are other strategies that can be better than simply selling the family home and spending down to Medicaid impoverishment, strategies that can make the money last as long as you do. Consult an expert in the financing of LTC or contact TheLongTermCareGuy.com for more info.