Long-Term Care Planning
Americans who reach age 65 can now expect to live, on average, another 17 years. But these years may not be spent in good health. Surveys have shown that a 65-year-old person has a 43 percent chance of entering a nursing home at some point in life.
It’s not too early to plan for what you might need down the road. Of older Americans who foresee needing long-term care services within the next year, only one in four say they would be able to pay for those services with their own family resources. Long-term care insurance policies can make many elder care options possible.
Elder care encompasses a wide variety of arrangements designed to provide varying levels of medical care or assisted living. Living at home is often possible with the help of skilled home nursing care provided by a health aide. Financing for home-care services can be difficult, however. Some seniors may qualify for benefits under Medicare or state Medicaid program, but eligibility requirements vary greatly. Money for home care may also be available under the Older Americans Act and some state agencies. Some of the newer Long Term Care Insurance policies now offer coverage for home care services.
For another option, consider assisted living facilities, which offer housing, limited nursing care, social services, and personal care to seniors who are not able to live independently but who are not sick enough for a nursing home. These facilities may charge more than $1,000 a month for basic services, in addition to substantial entry fees. Generally, residents qualify for Medicare benefits only if they receive skilled nursing services.
Continuing care retirement communities take assisted living one step further. They offer a complete range of accommodations, including 24-hour skilled nursing care. Fees for continuing care retirement communities are usually greater than for assisted living.
Nursing homes can often provide a higher quality of care than an ill elderly person can receive from family members at home, but they can be extremely expensive. Care in a nursing home costs an average of $127 a day, or more than $46,000 a year (and much higher in many facilities).
Long-term care insurance can help cover the costs of all these options. Most policies pay a fixed per-day amount for skilled, intermediate, and custodial care in state-licensed nursing homes. They also cover home health care and additional community-based services, such as adult day care, as well as assisted living, hospice care, and medical equipment.
According to the Health Insurance Association of America, the average cost of a policy for a 79-year-old is about $69 a month for four years of coverage, with $80 a day in nursing home benefits and $40 in home health benefits. More expensive premiums will offer more coverage.
You should not buy a policy if you can’t reasonably predict that you will be able to pay the premium for the rest of your life. The younger you are at the time of purchase, the lower the premium. If you are considering purchasing long-term care insurance, you should investigate the company’s reputation, be skeptical of endorsements, discuss the policy with your family, carefully review the terms, and never pay in cash.
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