Long
Term Care: The Cost Of Not Having Any
Most
senior citizens are living the good life by watching their expenses
very
carefully. The vacation where they find good deals, shop with coupons,
read your newsletter, etc. They have discussed long term care insurance
a number of times and always conclude that it would limit their lifestyle
considerably
to spend several thousand dollars a year on it. But recently a woman they
know had a stroke. Now the only nursing home that can handle her costs
$400/day.
After all her funds have been exhausted, she will be at the mercy of government
care.
They are once again discussing LTC insurance.
Long
Term Care Facts
There are more seniors now and they're living longer than ever. By the end
of this decade 20 million people will be over the age of 75. And, unfortunately,
with age comes more sickness and a decreased ability to take care of ourselves.
The
result is that over $1 billion a year is spent on nursing home care in Canada
and the U.S. And about one third of that is paid for by individuals.
Not
everyone will need professional long term care. Many retirees do fine on
their own without any help. Others will rely on family to provide extra care.
Only one in ten adults over age 65 will go to a nursing home. And half of
them will return home. But, the other half will stay the rest of their lives.
As
we grow older the likelihood of needing medical or custodial care increases.
Twenty-five percent of adults over age 85 go into a nursing home and remain
the rest of their lives.
For
those who do stay in a nursing home for extended periods the costs can be
breathtaking. Approximately 70% of the people in nursing homes have used
up their savings within one year.
Costs
of Long Term Care Insurance
The
cost of a stay in a nursing home averages about $110 per day. That works
out to a little over $40,000 per year. With more people living into their
80's and even 90's, it's not uncommon for someone to spend ten or more years
in a nursing home. So it's not surprising that a lifetime's worth of savings
can be wiped out.
And
nursing home care isn't the only possible expense. Many, need extended stays
in the hospital or require home health care.
To
help define patients' needs the insurance and medical industries have generally
agreed on three levels of care. Skilled care is performed under a doctor's
orders. It's generally provided by a licensed registered or practical nurse.
The nurse must be available around the clock. Thus most skilled care is provided
in a hospital setting. The expectation is that the care will help the patient
to recover and get well enough to resume a normal life.
Intermediate
care differs from skilled care in that the nurse is only available on a periodic
basis. The care may be given in a rehabilitation center or the patient's
home. Often it's a matter of administering injections or changing bandages.
Custodial
care is provided to meet a person's physical (not medical) needs and can
be provided by non-medical personnel. Assistance with eating, bathing, dressing
would fall within this category.
Does
The Government Pay For Long Term Care?
Many
people think that the government pays for all extended medical and custodial
care. That's not true. Medicare pays for almost all of the first 100 days
of skilled nursing care. But it will not pay for most home care, assisted
living or nursing home care. And Medicare does not pay for any custodial
care. And Canada has similar problems.
Medicaid
does pay for a large amount of extended care. But it's only available for
the poor. In the past many people gave their assets to their children when
faced with a long term care bill. Then they'd qualify for Medicaid. Recent
laws have tightened restrictions on that practice.
Another
problem with depending on government funding is that the patient is limited
to using facilities that accept Medicaid payment. And these might not provide
a level of care that's acceptable to the patient.
Finally,
there's the invisible element of inflation to consider. Remember that when
you're forecasting years into the future it doesn't take much to significantly
increase costs. Just a 5% inflation rate will double the cost of an item
in 14 years. So if you're 65 today just a little inflation will double prices
by the time you're 79. Will you live that long? Perhaps a better question
is: can you afford to gamble that you won't live that long? And, in case
you're wondering, nursing home costs have been rising at a 5% annual rate.
Options
For Long Term Care
What
options are there? First, she and her husband could hope to stay healthy
until shortly before death. However, medical advances make this less likely
every year.
Another
option is to buy insurance only for skilled and/or intermediate level care.
If available, this type of insurance would be a big help. It's also possible
that family can provide nursing home type care. But for many families that's
just not practical.
They
could also depend on relatives to care for them or pay the cost of extended
care if it's needed.
A
final option is to purchase long term care insurance. Over the last 15 years
more people have chosen this option. While it can be expensive, for many
it's the only way to protect assets that they've spent a lifetime accumulating.
About
the author:
Gary Foreman has worked as a Certified Financial Planner and currently
edits The Dollar Stretcher newsletter and website www.stretcher.com.
