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Paying for Long-Term Care

What Consumers Need to Know


Paying for Long-Term Care

There are many misconceptions for paying for long-term care. My advice - stay healthy!

Marcus Clackson

The financing of long-term care can be confusing, expensive, and onerous. Let's try to sort some things out for you.

Most adults do not believe that they will ever need long-term care of any kind. Yet predictions show that 50-70 percent of people will need this care. According to Penn State Professor Peter Kemper, Georgetown University Professor Harriet Komisar and Lewin Group Consultant Lisa Alecxih, 69 percent of today's 65 year olds eventually will need long-term care. Thirty seven percent will need nursing home care or assisted living; eight percent will spend more than five years there; 11 percent men; 28 percent women.

People are going into facilities at an older age needing more acute care. Despite alternatives to nursing homes the fact is that people are in such acute need that a nursing home is the only stop unless community support services rise to a level to be able to support people in this setting. Surprisingly residents tend to be admitted more for the chronic diseases - like heart disease, COPD, diabetes - than for slips and falls and hip problems. There are an increasing number of patients being admitted more for depression than dementia.

Of course some of these diagnoses are preventable if we start taking better care of ourselves.

There are five ways to pay for long-term care. People think that Medicare will carry the day. It does for no more than eight percent of the population. Medicare covers skilled nursing care only if you have been hospitalized for three consecutive days and then only for 100 days, 80 days of which you pay a 20 percent co-pay. ($144.50 per day (2012 rates). Care must be received within 30 days of discharge.

Next, self pay. According to The Kaiser Commission on Medicaid and the Uninsured, self pay accounts for how 20 percent of people now pay for nursing home care. Remember that is out of your pocket and out of your savings. The average nursing home stay is 2.8 years, so if you have $200,000 or so socked away just for this, you should be OK.

Your third option is Medicaid, the primary payer accounting for 70 percent of people in nursing homes. Essentially after you exhaust your own personal funds, you might become eligible for Medicaid. There are stipulations that I will not spell out here. Suffice it to say that it is not as easy as just going broke to qualify. And many people never want to consider this or think that it can be an option, a bit of stereotyping that Medicaid is a poor peoples' program. Consult a professional!

A fourth option is something called The Assurance Benefit. This benefit converts the death benefit of an in-force life insurance policy into a long-term care benefit plan. The Assurance Benefit is specifically designed to address immediate needs to pay for long-term care services. Life insurance is an unqualified asset for Medicaid eligibility. To qualify an applicant will often times need to lapse or surrender the policy. Converting the policy to an Assurance Benefit that pays directly every month towards the costs of long-term care is a Medicaid qualified spend down of the policy and it preserves a portion of the death benefit over the entire period.

Finally, the fifth option is purchasing long-term care insurance. Long-term care insurance is not just for older people. We live in a culture where there is a sense of urgency to discharge people from hospitals as quickly as possible and into rehabilitation. The cost of paying for that recuperation is often left up to the individual. So while nursing homes and seniors spring to mind, younger people who become ill or who suffer serious accidents might find themselves in that same situation needing convalescent care. For those without adequate health or disability insurance, or no insurance, the burden falls on them to pay.

There are three components of a long-term care policy - a daily benefit amount, a waiting period, and once the benefits begin, a benefit period.

Even long-term care insurance may becoming an extinct option. The exit or retreat of five key firms from the market since 2010 leaves only one dominant player. Consult a long-term care specialist. A good long-term care specialist has to listen first, then advise and consult, giving all the options so people can build their plan.

While having options sounds nice, the fact of the matter is that there has been so much emphasis on hospital and physician care that long-term care has fallen through the cracks. Even starting early to save for unplanned care may not be enough. What could help is taking care of your physical and mental health throughout your life so as to decrease the chances of potential long-term care needs and increase the potential for quality aging.

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