INTRO- Long term care whether in assisted living, a nursing home or at home is expensive. How to pay for such care is something we discussed on this program many times. Long term care insurance is one solution. Should you buy long term care insurance?
Q- What are long term care costs?
A - Long term care typically refers to the needs for helping with certain basic activities because of chronic illness or disabilities. The help can range from assistance with bathing, dressing and eating or the need for skilled care provided by professionals such as a nurse or therapist. The trouble is that basic health insurance or Medicare will only cover these costs for a short period of time if at all. Long term care is very expensive. Genworth Financial has estimated that the cost for a nursing home averages around $91,000 per year and round the clock home health care could be as much as $170,000.
Q- So what should someone do to make sure they can pay for this care if needed?
A- There are basically three choices-
- Pay for it yourself with your savings
- Let the government pay for it with Medicaid or in some situations with VA benefits. However as we have discussed you have to get rid of most of your money to qualify.
- Purchase Long term care insurance.
Q- Before we talk about long term care insurance go through the first two choices
A- As I mentioned for the cost of long term care insurance can be significant. According to the 2011 census for people age 65-69 the median net worth is a house worth $150,000 and $44,000 in investments. Their only income might be social security. These people will probably not want to incur an additional expense of maybe $3-4 thousand dollars a year for long term care insurance. They probably will just use up their savings and eventually qualify for Medicaid to pay their costs. Sometimes they will do some of the planning we have discussed on the show to save some of their estate for their children.
For people with substantial assets and a good pension in addition to social security, they might consider self-funding their long term care costs. I would think they would need at least one million dollars in assets at a minimum. That number probably covers around 5% of the families in America.
Q Ok, so you are not in the top 5% but you not in the bottom 50%. What do you do?
A. - I wish I had an easy answer. Unfortunately one size does not fit all. You will need to do a lot of research to see what's best for you. According to AARP Here are some factors to consider:
* Your age and health
* The cost of the premiums
* Your income
* The types of assets you own. For example if most of your assets are in a retirement plan or annuity, some of the Medicaid planning we have discussed such has giving away your assets is more difficult.
I recommend as a starting point visit the AARP web site for some good information on long term care insurance and the Ohio Department of insurance web site.
Conclusion- Whether to purchase long term care insurance is a difficult issue. You need to talk with your advisors on what choice is best for you.