Retirement News : Seniors : Prepare for the unthinkable: long-term care

Prepare for the unthinkable: long-term care

Date Added: 29-03-2005

I’ll bet you’re not considering the prospect that you might need nursing home or skilled home health care. But the unthinkable can happen. Just ask Superman -- actor Christopher Reeve. Reeve was paralyzed in a 1995 horse-riding accident, joined millions of Americans who require nursing care at home or who now reside in nursing facilities.

You insure your home against fire and your car against an accident -- and never complain if that money is “wasted.” Why not insure against one of the most expensive realities of life -- long-term care? As our lives lengthen and new treatments are developed, you -- or your parents -- are more likely to require some type of senior care.

With a little planning, you can buy long-term care insurance -- either for yourself, or as an annual gift for your now-healthy parents. And you can encourage your company to provide this coverage as an employee benefit. Otherwise you may become one of the 7 million Americans who, according to the National Council on the Aging, now provide or manage care for a friend or relative aged 55 or older and not living with them.

Long-term care insurance is a product that catches the attention of seniors, but the ideal time to buy it is actually when you’re in your early 50s and in good health. At that point, premium costs are lower, and you’re less likely to have a pre-existing condition that disqualifies you. But a society that values a youthful appearance seems unwilling to recognize these expensive facts of life.

The costs of long-term care are staggering today and should soar higher in the coming years when baby boomers retire. Even the GenXers won’t escape the impact. Your parents will either spend your inheritance on nursing home care, or you may find yourself taking care of your elderly parents out of your own retirement funds.

In fact, the U. S. General Accounting Office says that nearly 40% of people age 65 now will spend some time in a nursing home. The federal Health Care Financing Administration projects that spending on nursing home care will rise from about $94.1 billion now to $125 billion a year by the end of 2005 and $330 billion by 2030.

The average annual cost of a private nursing home is now about $55,000, or $150 per day -- with many facilities in large cities costing more than $65,000 a year. Those costs can add up quickly, and Medicare does NOT cover them -- except for a few days in a skilled nursing facility after a hospital stay.

And no Medicare supplement policy covers custodial nursing care. Yes, state Medicaid programs cover nursing care for the indigent -- but that means almost all assets and income must be spent down before the state will pick up the tab.

Medicaid spend-down “planning” has received attention as a way to deal with the nursing-care costs. Financial advisers counsel seniors to transfer assets to younger family members -- a process that must be completed at least three years before asking Medicaid to pay nursing home costs. But these state nursing home programs for the impoverished do not cover home-health-care costs. And aside from the moral implications of such a strategy, do you really want you or your parents to depend on a government-funded nursing facility?

Long-term care insurance can solve the problem in most cases. The latest generation of policies pays for "home care" at a senior daycare facility, as well as care in a skilled or custodial nursing facility. A portion of premiums may be tax-deductible, depending on your age and income. But not all policies are alike, the business is growing (There were just 4.1 million policy holders in 1998.) and coverages are constantly evolving, so study both the product and the pricing.

For More Information:

http://moneycentral.msn.com/content/CollegeandFamily/Caringforparents/P37497.asp