As I am rapidly approaching age 40, my though process on life and health has certainly changed from a couple of decades ago. While I still feel 25 on most days, you can’t argue with the calendar. Like it or not, I’m middle aged. With that label comes many questions about how to prepare for the coming years. Since I am a planner and don’t want my loved ones to have to make decisions for me, I am the type that has a will, life insurance, and an advanced directive that tells my family what I want to happen if I end up on life support. One question I haven’t really pondered is about the need for long term care insurance. We also have parents who are in their mid 60’s, so even if we aren’t ready to think about ourselves in a nursing home, it is a very real possibility for them. Should we be considering long term care insurance?
What is Long Term Care?
By long term care, I am talking about care needed if you can no longer feed and/or dress yourself of if you need help with basic personal hygeine and care. This can be from a caregiver who comes to your home, assisted living, or staying in a skilled nursing home. Genworth has compiled a cost of care map to see long term care costs by state. In Colorado, current annual costs for those services vary from $38,000 for a home health aide up to $78,000 for a private room in a nursing home.
Who Pays for Long Term Care?
Contrary to popular believe, your health insurance or Medicare does not pay for nursing home care, other than for short rehab stays of 100 days or less when you leave the hospital after an illness or injury.
There are basically four ways to pay for long term care.
Friends and Family– If you have friends and family who can provide care, you might be able to avoid a nursing home. However, this can come at a great personal and financial cost to your loved ones. I know my Mom and her siblings were under great stress when trying to care for my elderly grandmother in the last few years of her life. Taking care of an infirm relative is like having a 150 pound baby with none of the joys that come with newborns.
Medicaid-If you have few assets and little money, a government sponsored plan could provide long term care coverage. You do have limited choice in facilities or providers, and there is no guarantee Medicaid will be viable by the time younger people might need it.
Self Insure-If you have sufficient assets or investments, you could self insure against long term care costs. Although only about 5% of people need the highest cost long term care for several years, the average lifetime cost for this group according to a 2005 study is $250,000. If you don’t have this much money or want to leave an inheritance to your children, self insurance could fall short.
Long Term Care Insurance– Special insurance policies can cover much of the cost of a nursing home or home health aide, but they are expensive. The earlier you sign up for a plan, the cheaper the cost, but who wants to buy long term care insurance in their 30’s? If you wait too long, you could also be declined due to health reasons. The most common age to get long term care insurance is the mid 50’s. You are less likely to get declined, and premiums aren’t as expensive as waiting until the next decade.
You might also use a combination of some of these methods. Maybe get a less comprehensive long term care policy and supplement with retirement savings? If you are married and like to play the odds, you might consider insuring the husband only. Men, on average, don’t live as long, so care policies often cost less. Assets could be saved for the surviving wife and care she might need.
Regardless, I don’t want my daughter to have to decide what to do with me if I can’t take care of myself. Likewise, I don’t want to decide for my parents. My Mom and Dad did purchase a long term care policy in their late 50’s. My in-laws are Medicaid eligible. No one wants to think about needing a nursing home, but if you make a written plan that others can access, that’s one unpleasant deed that can be taken off the table. It might help you sleep better at night as well.
Have you had loved ones without a long term plan to deal with aging? Would you purchase long term care insurance? If so, when?