Most people think of long-term care insurance as nursing home insurance, when the opposite is true. Long-term care insurance provides options to avoid placement in a nursing home, unless a nursing home is where someone prefers to live. And please don’t get it wrong, nursing homes have changed significantly over time and many are now very clean and nice facilities. However, a nursing home is usually not the place someone would want to spend the last days or months of their life unless there are no other options.
Long term health insurance plans are growing in popularity as consumers realize they offer options for independence. Many studies indicate that two-thirds of those over 65 will require long-term care stays. A long-term care stay is a fancy way of saying you are staying in a nursing home or skilled facility. And more than forty percent of those over 65 will experience a long-term care stay of two or more years. This is a long time if you’re in a facility in a shared room – not a private room, with a roommate you don’t like. Think back to those college days and think about how you would feel if you were in a similar situation at age 80.
And surprise, Medicare doesn’t pay for long-term stays. Medicare usually covers days 1-20 if medically necessary and progress is being made for rehabilitation. On days 21-100, the person pays an insurance fee of $128 per day (in 2008) and after 100 days, the person is fully responsible for one hundred percent of the costs, which average between $175-220 per day (in 2008). As with anything, these costs are expected to increase by 3-5% per year.
Long-term care insurance pays not only for these long-term care stays, but also for care provided in the home, where most people would prefer to live for as long as possible. It also pays for day care, assisted living, home modifications, and other services, depending on the policy.
Many people mistakenly believe that long-term care is too expensive. Contrary to what I ask you? As opposed to $6,000 a month in a long-term care facility? Compare a $200 monthly premium to the cost of $200 PER DAY in a long-term care facility and tell me if long-term care is too expensive?
Many are shocked when the cost of a year in a long-term care facility of $75,000 eats up most of their retirement savings. Or when they have to “spend” to qualify for public aid called Medicaid. The government has determined that with the increasing number of baby boomers who will need medical care in the future, it is impossible for the government to afford this care.
According to the Debt Reduction Act of 2005. This act states that individuals who wish to qualify for Medicaid assistance must spend all of their assets before becoming eligible for Medicaid. And there is a five-year lookback period to ensure that assets such as houses and money were NOT given away to relatives in an effort to prevent the government from receiving these funds. When money or resources are given away, the government imposes a fine equal to the financial amount given away divided by the cost of a month in a long-term care facility. So, for example, if your parents gave away $60,000 today and want to qualify for Medicaid in 2009, Medicaid will accept the application and penalize them for ten months of care. This means that they cannot receive services through Medicaid for a period of ten months from the date of their Medicaid application. This means that if the care is really necessary, children and other family members pay for the care themselves.
Even more reason not only to consider long-term care insurance for yourself, but also to purchase a policy for your parents if they can’t afford the premiums. The question is whether they will pay now or will you pay later for your parents’ care. Parental care and emotional and financial stressors have a major impact on children’s retirement prospects. Parents always assume that their children will take care of them, but fail to consider the impact on employment, retirement income, and even marriages and children.
Don’t put yourself, your parents, or your children in a situation where you need care and don’t have a backup plan to pay for care. Because we will all pay for care in one way or another when we are older. It’s inevitable. We will pay because of our ability to have long-term health insurance that ensures that we make decisions about our care. We will pay because our parents need care and they have not made financial preparations for the costs. We will pay because we have not financially prepared for the cost of having to receive care through public aid called Medicaid.
Unfortunately, the chance that we all die is one hundred percent absolute. The question is how do you want to spend the last years of your life? In a way that you choose or in a way that is chosen for you?