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long term careFrom the date insurance companies introduced the concept of Long Term Care Insurance there has been an ongoing debate in the media regarding the statistical probabilities of needing Long Term Health Care and the financial efficiency of the Long Term Health Care policy.  Most of the time these discussions ignore the need for Home Health Care or the physical and emotional impact on the care giver.

Well, all that you need to become a believer in the need for Long Term Care Insurance is to live the experience.  Unfortunately, I (and my wife) have had the opportunity to live this over the past five years.  First, my father-in-law developed Alzheimers.  My mother-in-law tried to care for him at home, first alone and then with full-time home health care…cost about $10,000/month.  But the real cost was to the caregiver’s (mother-in-law) health and well being.  The only choice was to transfer him to a nursing home where he passed away three years later…cost about $300,000.

Now we are dealing with a similar situation with my father who suffered a massive stroke on Thanksgiving.  He is now at home but requires care…attempted by Mom.  Thankfully, they have Long Term Care Insurance which is helping to soften the financial burden of Home Health Care.  But in both cases, my Dad and father-in-law, the mental, emotional and physical impact on the care giver is enormous.

If you think it can’t happen to you, think again.  Here are some “Illusions” and the “Reality” regarding Long Term Care.

Illusion – “Medicare and my Medicare supplement policy will cover it.”

Reality – In fact, Medicare and “Medigap” insurance were never intended to pay for ongoing, long-term care: Only about 12% of nursing home costs are paid by Medicare, for short-term skilled nursing home care following hospitalization. (Source: AHIP, A Guide to Long-Term Care Insurance, 2004) Medicare and most health insurance plans, including Medicare supplement policies, do not pay for long-term custodial care. (Source: Medicare & You 2011, Centers for Medicare & Medicaid Services)

Illusion – “It won’t happen to me.”

Reality – About one-third of individuals turning 65 in 2010 will need at least three months of nursing home care, 24% more than a year, and 9% more than five years. (Source: What Is the Distribution of Lifetime Health Care Costs from Age 65?, Center for Retirement Research at Boston College, March 2010)  Women have a longer life expectancy than men…about 71% of nursing home residents are women. (Source: CDC Vital and Health Statistics, Series 13, No. 167, June 2009)

Illusion – “I can afford it.”

Reality – As a national average, a year in a nursing home is currently estimated to cost $83,585. In some areas, it can easily cost $100,000 or more! (Source: 2010 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs)  The average length of a nursing home stay is 835 days. (Source: CDC Vital and Health Statistics, Series 13, No. 167, June 2009)  The national average cost of an assisted living facility in the U.S. was $39,516 per year in 2010. (Source: 2010 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs)  Home health care is less expensive, but it still adds up.  Bringing an aide into your home for 20 hours a week easily can cost $1,800 each month, or $21,000 a year. (Source:  2010 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs)

Illusion – “If I can’t afford it, I’ll go on Medicaid.”

Reality – Medicaid, or welfare assistance, has many “strings” attached and is only available to people who meet federal poverty guidelines, and the “loopholes” are closing rapidly.

Whether purchased for yourself, your spouse or for an aging parent, long-term care insurance can help protect the assets accumulated over a lifetime from the ravages of long-term care costs.

And if you are unsure whether you will ever need care, the insurance industry has developed a life insurance policy that will pay Long Term Care benefits if needed.  The benefits are deducted from the life insurance proceeds at death.  If you don’t need Long Term Care the death benefit will go to your heirs income tax-free. (I bet you will die someday!)

What are your thoughts?  If you would like to discuss this topic further, please contact me at: (518) 608-8939 ext.21 or by email at: rharris@stage2planning.com

Rick Harris

Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

This article is published for residents of the United States only.  Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered.  Therefore, a response to a request for information may be delayed.  Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

Topics: financial planning, wealth management, long term care

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