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Wednesday, November 27, 2013

The increasing cost of long-term care

Last station nursing homeBy Jenni Wiltz

You might already know that 70% of people over age 65 will need long-term care at some point in their lives. But did you know that 40% of the people currently receiving long-term care are between the ages of 18 and 64? According to LongTermCare.gov, a surprising number of young and middle-aged people (not seniors) need help with one or more activities of daily living, such as dressing, bathing, or eating.

Obviously, planning for your long-term care needs isn't something that should be put off...especially with the rising cost of care.

How much does long-term care cost?

Every year, the cost of care goes up. A recent survey by the MetLife Mature Market Institute shows that the total cost of long-term care treatment can easily add up to $200,000. But how do the costs get so high? It all depends on what kind of care you need.

Let's take a look at a few numbers from the 2013 Genworth survey of long-term care costs:
  • Private nursing home room: The median annual rate for a private nursing home room is $83,950. In 2008, it was $67,525. That's a huge increase...and it's not likely to go back down anytime soon.
  • Hourly rate for a home health aide: The national median hourly rate is $19.
  • Adult day care: The national median daily rate is $65.
  • Assisted living community: The national median monthly rate is $3,450.

How do I know what my costs will be?

You can't predict the future, but you can make a general estimate of costs. Here are a few questions to ask yourself as you start figuring out how much you'll need:
  • Your family history. Have others in your family needed daily care for long periods of time? If so, you can use their experiences to help estimate your own.
  • Your current health. Do you have any health problems that may indicate a need for care sooner rather than later?
  • Your age and gender. Women tend to live longer than men, which means they usually need care for 2-3 years longer, too.
  • Your family situation. Do you have family members nearby who can help take care of you? If not, you'll need to plan on paying for 100% of your care.
  • National averages. You can also refer to long term care statistics to help estimate your costs. For example, AARP notes that the average nursing home stay is 2.5 years. Just multiply that by the yearly cost listed above to get a quick estimate.
These costs add up quick, no matter which type of care you might need. Some people look at these costs and wonder if they'll have to sell their home, sell off investments, or depend on their family's generosity just to pay for the care they need. Those are options, of course, but here are a few more.

Long-term care payment options

It’s extremely rare that anyone has hundreds of thousands of dollars in cash available to pay out-of-pocket. According to Nationwide Financial, 54% of Americans think Medicare will pay for their long-term care. It won’t—Medicare does not cover long-term care unless it is the direct result of a specific illness or surgery (and even then, coverage comes with a cutoff date).

Here are a few options for long-term care payment:
  • Long-term care insurance: Private insurers offer policies that can be expensive, but not nearly as expensive as long-term care costs.
  • Medicaid: There are restrictions on assets (less than a couple thousand dollars) and multi-year “lookbacks” designed to ensure only the truly needy qualify for this program.
  • Life insurance with long-term care rider: Many insurers allow you to dip into your death benefit to pay for long-term care.
  • Annuity with long-term care benefits: Some annuity providers allow buyers to elect a percentage of their annuity’s face value—200%, for example—to be available for long-term care coverage. If you don’t need long-term care, the money stays in your annuity.
Paying out-of-pocket is increasingly not an option. Family members can act as caregivers, but the financial strain and emotional stress take their toll. While long-term care is a touchy subject that most folks don’t want to think about, a little bit of preparation can save your family money, time, and stress.

About the author: Jenni Wiltz writes about long-term care, health, and insurance for TrustedQuote.com.

Image license: Ulrich Joho, CC BY-S.A.  2.0