Long Term Care
Am I Prepared for Long-Term-Care Expenses?
In general, Americans are not sufficiently prepared to pay for long-term care. Many of them go through their lives simply hoping that they won’t ever need it. Unfortunately, in the event that you or a loved one does need long-term care, hope won’t be enough to protect you from potential financial ruin.
Also, the odds that you will need some kind of long-term care increase as you get older.
Self-Insurance as an Option
To self-insure — that is, to cover the cost yourself — you must have sufficient income to pay the rising costs of long-term care. Keep in mind that even if you have sufficient resources to afford long-term care now, you may not be able to handle rising future costs without drastically altering your lifestyle.
The Medicaid Option
Medicaid is a joint federal and state program that covers medical bills for the needy. If you qualify, it may help pay for your long-term-care costs. Unfortunately, Medicaid is basically welfare. In order to qualify, you generally have to have few assets or will need to spend down your assets.
State law determines the allowable income and resource limits. If you have even one dollar of income or assets in excess of these limits, you may not be eligible for Medicaid.
To receive Medicaid assistance, you may have to transfer your assets to meet those limits. This can be tricky, however, because there are tough laws designed to discourage asset transfers for the purpose of qualifying for Medicaid. If you have engaged in any “Medicaid planning,” consult an advisor to discuss any new Medicaid rules.
Long-Term-Care Insurance
A long-term-care insurance policy may enable you to transfer a portion of the economic liability of long-term care to an insurance company in exchange for the regular premiums.
Long-term-care insurance may be used to help pay for skilled care, intermediate care, and custodial care. Most policies pay for nursing-home care, and comprehensive policies may also cover home care services and assisted living. Insurance can help protect your family financially from the potentially devastating cost of a long-term disabling medical condition, chronic illness, or cognitive impairment.
Long-Term Care Cost
Long-Term-Care Riders on Life Insurance
A number of insurance companies have added long-term-care riders to their life insurance contracts. For an additional fee, these riders will provide a benefit — usually a percentage of the face value — to help cover the cost of long-term care. This may be an option for you.
CHOICES IN ASSISTED LIVING
If you can’t live on your own, what are your options?
When you need help with daily living, what choices do you have? You have three choices: home sweet home, a retirement community, or a nursing home as your health and preferences permit. While we’re speaking of choices, long term care insurance has proven to be another wise choice for many Americans – and with longevity increasing, it may be prove even more valuable to families in the future.
Assisted living. Some “assisted living communities” are small, some are huge, but regardless of size, they have common characteristics. Assisted living facilities are socially oriented, typically offering rooms or even distinct housing units for rent, with housekeeping and transportation and meals usually provided. They may or may not be licensed care facilities, and most don’t offer anything more than limited medical care onsite.
Residents really enjoy many of these facilities, but there are some caveats. Some elders really like their privacy, and assisted living facilities encourage a great deal of group activity. Also, sometimes these facilities do ask elders to pack up and leave. The classic example is when Alzheimer’s Disease progresses to a point where it motivates violent or socially disruptive behavior. The amount of personal care in one of these facilities may not be as much as desired. To enter one of these communities, you often have to pay about as much as you would for a luxury sedan (or two), and there is often monthly rent besides.
The nursing home. Of course, there are some elders who need frequent access to medical care – perhaps around the clock. This is the advantage of the nursing home. The disadvantages include a distinct lack of privacy, a borderline hospital environment, and of course the potential for mistreatment of the residents. Nursing homes are often perceived as the last residence of many Americans, but the reality is that some people do return home or transfer to an assisted living facility when their conditions improve.
Through a licensed nursing home, an elder can opt for three types of care. Skilled care is any daily treatment program prescribed according to a doctor’s orders and designed to improve a patient’s health; it is administered by a licensed nurse or therapist. Intermediate care is essentially skilled care delivered on a less frequent basis. Custodial care is care that helps people with daily living activities like eating and bathing, though it can also include things like catheter or colostomy draining. Long term care insurance commonly pays for all three types of care.1
Just how expensive is nursing home care now? One national provider of long term care insurance put out a survey in early 2008 and found that the average annual cost of nursing home care nationwide is $76,460.2 It can be notably higher in big cities.
How about staying home? With demographic trends, the average suburban house may soon become a common kind of American retirement home. LTC insurance can pay for forms of skilled and non-skilled care administered in the home, such as rehabilitative care and therapeutic care. The problem is that the typical suburban home may need to be modified to accommodate a wheelchair, or to make bathroom visits easier, or to guard against falls and other mishaps. The typical suburban home is also some distance from a hospital, a mall, and friends, and public transportation in most of America’s suburbs is frustrating and inconvenient for many elders. But just being around family can help to counteract that isolation from community.
While welcoming an elderly parent into a home is a preferred choice for many baby boomers, talking openly about some of the financial and healthcare matters involved can make the lifestyle transition a bit smoother. Sharing a living space after a period of independence may not be easy, and it is wise to talk about who will pay for what, from medical expenses to food and gasoline.
Who can help you understand your choices? Speak with a qualified financial or insurance advisor who understands long term care insurance and assisted living options. What you learn may help you make better choices.
These are the views of Peter Montoya Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.
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