Long Term Care in Retirement

The likelihood of a senior citizen over the age of 65 requiring some kind of long-term care is two in three, with an average time of three years during which help will be needed. The Center for Medicare and Medicaid Services estimates that by 2020, 12 million older Americans will need long-term care services. And long-term care is an expensive proposition – according to Kiplinger’s Retirement Report, the rates on private-room nursing homes rose 4.6% to an average of $229 per day in 2010. Medicare does not generally fund long-term care. According to Medicare.gov, Medicare does not pay for what they term “custodial care” –  non-skilled care that helps you with daily living activities including dressing, bathing, and using the bathroom. And we can throw in the fact that MetLife, one of the largest sellers of long-term-care insurance will accept no more applications for individual and group long-term care insurance starting in 2011.

With an aging senior population that in 2030 will for the first time in history result in more people over the age of 65 than under the age of 17, this is a recipe for disaster, a perfect storm brewing on the horizon.

What are the options?

Two-thirds of all long-term care spending is publicly financed with Medicaid paying the largest share at 40%. 36% of long-term care services is financed either through private insurance or out-of-pocket expenditures. And the out-of-pocket expenditures (premiums, co-pays, deductibles) account for 29% of total long-term care annual expenditures, second only to Medicaid. What can we do to prepare for our own potential long term care requirements?

Family and friends – in 70% of cases, friends and family are the sole caregivers for aging seniors. The familiarity of existing relationships plus well-known surroundings can be a big plus to a struggling senior. However the nature of the required care and the extended period of time typically involved can quickly strain an otherwise healthy family situation. And the job is 24/7. For caregivers, it is important to take care of yourself as well as your ward. You need time for the rest of your family and to live your life. Sometimes there does not seem to be enough hours in the day.

Private long-term care insurance policy – although expensive, this insurance could provide the safety net you may need to survive. Not everyone will need it but if you do the benefit can be huge. In his book ”The hard times guide to retirement security”, Mark Miller addresses the need for long-term care and offers some guidelines to help in your decision process. Key considerations include:

(1)  Daily Benefit – $150 per day is a recommended satisfactory amount.

(2)  Length of coverage – two years on average should be sufficient.

(3)  Elimination period – how much time must elapse before your benefits start.

(4)  Shared coverage – a couple can share benefits so if one maxes out their allowance they can tap into the benefits of their spouse.

(5)  Stick with a major carrier.

I have not purchased a long-term care policy but there are various websites that can provide quotes from across numerous carriers. One place to start is Long Term Care Insurance Planners,  brokers who have been doing this for 18 years with clients in 42 states, representing firms like MetLife, The Hartford, and Travelers.

Some other possible options to help prepare and pay for Long Term Care

  • Your current or former employer or union may offer long-term care insurance.
  • Prepare for the time when you will need long-term care – Momentum Today offers three tips: take care of your health now; have a plan for when you need care; and know how you will pay for long-term care.
  • Current and retired Federal employees, active and retired members of the uniformed services, and their qualified relatives can apply for coverage under the Federal Long-term Care Insurance Program.
  • Medicaid – each state offer Medicaid but eligibility rules vary. The program provides health coverage for people with low incomes, those qualifying must have individual assets totaling no more than $2000 or $3000 as a couple. To find out more specifics on your state, visit http://finder.healthcare.gov/
  • Program for All-inclusive Care for the Elderly (PACE) – a government program that helps those requiring nursing-home level of care to stay at home. Prescriptions, doctor visits, home care, and check-ups are provided. You must live in the service area of a PACE organization and be able to live safely within your community. Visit www.pace4you.org to find a program near you.
  • The Department of Veterans Affairs (VA) may provide long-term care benefits and services for service-related disabilities or to certain eligible Veterans, as part of VA’s health care program. Visit www.va.gov for details.

My first job after graduating from college was selling life insurance. As a 21-year-old with no family, no kids, and no real responsibilities beyond food and shelter, it was a challenging sale because I could not effectively put myself into the shoes of the families I spoke with. Although their needs were real, I did not get it. Today, after having raised our kids and put them through college, I understand the value and would make a much better life insurance salesman.

It will not do to leave a live dragon out of your plans if you live near one ~ The Hobbit by J.R.R. Tolkien

I under long-term care – I “get it” – and I understand the importance of preparing for its likelihood. Chances are that most of us will need it in some shape or form. We cannot ignore it but we can prepare as best we can to keep that dragon at bay.

Additional Resources

Healthcare.gov – http://www.healthcare.gov/foryou/seniors/longtermcare/

Medicare.gov – http://www.medicare.gov/longtermcare/static/home.asp

Family Care Giving – http://familycaregiving101.org/help/financial.cfm

The SCAN Foundation – http://www.thescanfoundation.org/sites/default/files/LTC_Fundamental_3.pdf

Don’t forget to pick up a free copy of Navigating the Retirement Jungle, available upon request by mailing to lovebeingretired@hotmail.com.

2 thoughts on “Long Term Care in Retirement

  1. Based on my parent’s experience, the need for long-term care can arise quite rapidly. My Mom went from relatively healthy to being a 24/7 invalid in just over 2 years. Luckily, she had an amazingly good supplemental insurance policy from her days as a school teacher in Massachusetts that covered 99% of what Medicare didn’t.

    She and my Dad also moved into a three level retirement community 4 years ago so the kids wouldn’t have to worry about much of this. Though expensive, most costs and different levels of care are covered.

    The bottom line is planning. If left to chance, you are leaving an enormous burden for somebody else.

  2. I recently purchased long term coverage for my wife and me. I had resisted because I didn’t see the benefits from experience with my parents and the products that I knew about were very expensive for the benefit provided. I was more into thinking that my time and money was better focused on building assets. I didn’t know what I didn’t know. There were better products than what my company made me aware of. I can’t help thinking that my luck will hold out and I will never need it but I decided to go ahead. It is something that I can do to control risks and protect assets for my sons.

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