Managing the Costs of Long Term Care

In a good news/bad news scenario, our average life spans are longer than ever before, but the longer we live, the more likely it is that we will need extended medical care. This could be in the realm of rehabilitation after a broken hip, or the management of ailments such as Alzheimer’s disease.

While we are feeling young, healthy and fit, it is normal to avoid thinking about needing long-term health care services. But, the facts are that each year approximately 11 million adults in the US need some type of long-term care, and that number will keep increasing as the baby boomers begin aging. And, notes Tim Gannon of Fidelity Investments Life Insurance Company, “As you age, your potential for needing long-term care increases significantly.”

It is not more than two or three generations ago that aging parents would move in with their grown children’s family.  But, this is an age of independence, and most people are reluctant to saddle their children with that kind of care.  The baby boomers, in particular, don’t want to be a burden on their families.  As Gannon so succinctly has stated, “Family dynamics have changed.”

Therefore, the aging population needs to depend upon professionals such as home health aides, nursing homes and other providers. We are talking about a lot of money here.  The average cost of a year in a nursing home is $155,000 for a private room. The decision that needs to be made is whether or not you can depend on your savings, or should you invest in long-term-care insurance, whose costs can vary from year to year.

Before deciding whether to purchase a long-term-care insurance policy, consider the costs involved if you don’t have insurance. If you’re age 65 or older, Medicare generally pays for routine medical issues such as regular doctor’s visits, and appointments with specialists. In-patient procedures at hospitals are typically covered, and some short-term home health care services are provided to Medicare recipients.

Medicare only covers some expenses, and then for not any longer that 100 days, at the most. Medicaid will only help once you have depleted your savings.

So how much will you actually have to pay out of pocket for these kinds of services? The median cost for a nursing home can be $155,000 per year. The median hourly rate for a home health aide is $20 or $45,000 per year.

This cost can truly jeopardize your savings, which could mean a major change in lifestyle for your spouse, and undermine the financial legacy you leave to your heirs.

Although long-term-care insurance will give you peace of mind, the policies are complicated, and you will need to work with the help of a professional to buy the policy that fits your particular needs.

First of all, buy the policy now.  The longer you wait, the more expensive the coverage becomes. And, the longer you wait, the greater are the chances of you developing a significant medical event that will prevent you from being approved.

Most of the long-term-care policies cover the same types of costs. The choice of plan you select will be based on the amount of coverage that you want. You also need to consider the duration of your coverage. Unlimited coverage is not worth the additional cost.  Most people opt for a three-year period of long-term-care services. That period would most often begin when normal daily functions become unable to be performed. It could also kick in when you’ve experienced a medical issue.

One very important issue to consider is inflation protection. If, for instance, you purchase your insurance when you are in your 50s, you will need to have an inflation protection rider so that 20 years down the road you will have the coverage that you signed up for when you were in your 50s.

Carefully study the basics in the different policies to select the policy that is best for you.  According to Gannon, “The right plan depends on each individual’s situation. If you buy a policy without carefully considering your situation, you may end up paying for more—or less—coverage than you ultimately require.”

Call us at Kabb Law to help you purchase the right policy. 216-991KABB (5222).