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With
all the buzz about the aging of the American population and the
enormous expenses of long term care, you may want to get more facts
about funding this type of care for yourself or a relative. The
fact is that each of us have different needs and financial situations,
and a careful analysis is key to preparing for the future, whatever
it may bring.
Can I afford simply to invest my own money and pay for long
term care with my own assets?
 Long term care is expensive today. According to The
Health Insurance Association of America’s A Guide to Long-Term
Care Insurance, (published in 2002) a year in a nursing home is
currently estimated to cost a national average of $50,000 with some
areas easily costing twice that amount, and just three visits a
week by a home care aide can add up to $12,000 a year with skilled
help costing much more.
Of course, costs are likely to increase, just as other health care
expenses continue to rise. So if paying upwards of $50,000 a year
now for a stay in a nursing home sounds like a problem, the situation
you might face in a couple of decades will be far more challenging.
If you are concerned about one partner using up the assets the
other may need to live later on, or if you want to preserve assets
to leave to your heirs, you need to face the fact that long term
care could take a big bite out of your funds. Long term care can
consume your retirement savings and other assets very quickly.
Can't I utilize Medicare or Medicaid for
my long term care needs?
Many people hope to take advantage of Medicare or Medicaid
in the event of long term care needs. However, the Health Insurance
Association of America advised in 2002 that Medicare pays only approximately
12% of all nursing home costs overall, and these are for short-term
skilled nursing home stays following hospitalization. Medicare pays
for home care only for short-term unstable conditions, not for the
longer-term assistance that long term care insurance is designed
to cover.
To be eligible for Medicaid, you must meet a range of federal and
state guidelines regarding your assets and income. This may mean
that you would have to spend most of your own money before qualifying
for Medicaid at all. (Requirements vary by state.) Once you are
dependent on Medicare or Medicaid, you will be paid only for approved
charges, and will be limited to their approved facilities for care.
Does this mean that nearly everyone needs
long term care insurance?
Not everyone. The U.S. Senior Health Cooperative, in its book Planning
for Long-Term Care, published in 2002, recommends that you consider
long term care insurance if you have over $75,000 in assets
other than your primary house and your car ($150,000 for a couple)
and over $25,000 in annual household income ($50,000 for a couple).
If you have less money than this, you may eventually be able to
rely on Medicaid.
If you have more than about two million dollars in liquid assets,
you may be just as happy paying for long term care as you need it.
However, some wealthy individuals use long term care insurance as
a tool to protect their assets, rather than taking the risk of paying
for the care itself.
I hope I never need long term care, and I
don't like to make sacrifices now to save for something I may never
use!
It is true that you may never need long term care. But, in 2002
alone, about 7 million men and women over the age of 65 required
services from a nursing home or home or community based program,
according to the Health Insurance Association of America’s
Guide. This association also asserts that, by the year 2020, 12
million older Americans will require long term care. The longer
you live, the greater the possibility that you will someday need
assistance with the basics of everyday living. Among people who
have purchased long term care insurance, a full 33 percent eventually
require long term care and use their benefits, according to financial
planning expert Suze
Orman.
You may want to look at a long term care insurance plan that pays
a benefit to your spouse or heirs when you die in the event that
you have not used up your benefit dollars for care. This way, there
can be a financial benefit for the people you care about.
Are the benefits of long term care insurance
only important for our later years?
In fact, no. About 40% of the people needing long term care are
adults between ages 18 and 64, who may have had an accident, a stroke,
or developed multiple sclerosis or another illness, according to
the 2002 Long Term Care Planning Handbook, published by Federal
Handbooks, Inc.
Most people are unprepared for the high, ongoing costs of this
care, and it can present real difficulties for a younger family.
The benefits of long term care insurance work for a younger person
just as they do for a senior.
I am married. How can a spouse cope - physically,
emotionally and financially - if the other partner becomes ill and
requires expensive long term care?
For many people, one of the biggest worries about aging is becoming
ill and using up the couple’s money. You may be concerned
that your care needs will not leave enough to take care of the spouse
later on. In addition, you don’t want your spouse to have
the physical and emotional burden of caring for you full time.
In this instance, long term care insurance can help assure that
the care one spouse may require does not drain a couple’s
assets, or place an undue burden on the other spouse. Wise options
may include creating a joint policy and adding features such as
a return of premium benefit for the surviving spouse or a paid-up
survivor option to eliminate or reduce policy premiums for a surviving
spouse. The joint policy is generally a more cost-effective option
than purchasing two individual policies.
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