Invest In Long-Term Care Insurance

By Jane Sinclair

Retirement Services Incorporated

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Invest In Long-Term Care Insurance

An elderly person needs long-term care when he or she cannot handle normal daily activities such as bathing and eating. Someone must step in and help him or her from then on.
Long-term care is expensive1. The average cost for one year in an assisted-living facility is in the $30,000 to $40,000 range, while home health care runs in the $16 to $20/hour range. The cost of private nursing homes begins at around $70,000 per year. Who can pay for this?
Often people think that government programs like Medicare and Medicaid do. But this is not generally the case. Medicare pays for health care for people 65 and over. It does not pay for long-term medical service such as assisted living or adult day care.
In fact, Medicare2 pays only the first 100 days of skilled care, such as physical therapy or nursing. But you are eligible for the care only if you have been in the hospital for at least three days. And the care you receive must relate to the treatment of an illness or injury. Medicare pays 100% for the first 20 days and all but the first $95 per day (2008) for the next 80 days. That's it3.
Medicaid pays for health services for the very poor of any age. Qualifications for Medicaid vary by state. But generally the law says you must first spend down to the poverty level, using up all but about $2,000 of your assets. There may be long waiting lists for facility care. Under Medicaid, nursing home care is essentially the only option. Home care, assisted living facility care, adult daycare, outpatient services, and alternate caregiver services are not usually reimbursed under Medicaid.
So what do people do?
Either you are poor enough to qualify for Medicaid, rich enough to pay all long-term care out of pocket, or somewhere in between.
People with assets of less than $200,000 generally cannot afford long-term-care premiums, and many in this group may qualify for Medicaid.
Those having assets to invest of ~ $2 million and up will often consider that they can pay long-term care costs out of pocket for several years of long-term care. They may simply forgo long-term care insurance entirely.
It is the couples with assets in $200,000 to $2million range that may have to seriously consider buying long-term care insurance. They could see their savings devastated by long-term care expenses with little hope of passing something on to their kids.
These articles are not intended to provide tax or legal advice and should not be relied upon for such. They are summaries of our understanding and interpretation of some of the current laws and regulations and are not exhaustive. Investors should consult their legal or tax advisor for advice and information concerning their particular circumstances.
1 MetLife Mature Market Institute, “The MetLife Market Survey of Nursing Home & Home Care Costs,” September 2006. MetLife Mature Market Institute, “The MetLife Survey of Assisted Living Costs,” October 2006.
2 www.medicare.org – for Medicare and Medicaid information.
3 http //www.medicare.org/content/view/20/67/