Terry Balding & Associates - Individual

Long Term Care Planning


Planning for Long-Term Health Care Costs 
Now that Americans are generally living longer, you will have more time to enjoy the fruits of your labor – or will you? For all too many, the dream of a comfortable retirement is being shattered by the harsh reality of rising health care costs. A catastrophic illness, such as a stroke or Alzheimer’s disease, can cause unexpected financial hardship or even the prospect of welfare during a time of life supposed to be the "golden years". What are the problems? What are the answers?

Skyrocketing Health Care Costs
Inflation is a fact of life. The frightening statistics on health care costs, however, show that they rise much faster than other services.

Advances in medical techniques and pharmaceuticals may allow us to live longer lives, but they carry staggering price tags. Because seniors require a greater percentage of health care services, the burden of these increasing costs can outstrip the assets they have saved.

An Aging Population
In 2031, one out of 5 Americans was classified as elderly. By 2050, one out of 4 will be over the age of 85.

Few of us are planning for the eventual need for long term care. But living longer does not necessarily mean living in perfect health. And adequate income for retirement may not be adequate for long term care costs, which can quickly erode the assets saved to provide for later years.

The Changing Family
The traditional solution for long term care, moving in with one’s children, has been made less viable by the geographic scattering of the nuclear family.

The two-income family is another problem; without a family member who regularly stays at home, more aging parents have no choice but to seek professional care.

Statistics show that today’s American family can expect to care for children for 17 years and aging parents for as long as 18 years. This "triple squeeze" – having to pay for one’s own children, personal goals, and parental care can mean financial hardship for the child as well as the parent.

Will You Lose All You’ve Worked For?
In the growing elderly population, one in four will require nursing home care for 3 months or longer, and one in 10 will need nursing home care for 3 years or more.

The current cost of nursing home care can range from $51,000 to $73,000 annually. 

One of today’s most frightening facts regarding nursing home care is this: Half of those now living in nursing homes on welfare assistance originally entered the home paying their own way.

What About Medicare and Medicaid?
Medicare and Medicaid are both good insurance programs. However, the biggest misconception people have is that these programs provide for all medical needs after age 65.

The truth is, Medicare insurance is not designed to provide resources for long term care, which is usually custodial, not medical, in nature.

Medicaid, the final safety net, is only useful as a last resort. Applicants and their spouses must be effectively impoverished to qualify, because Medicaid was designed to provide only for those who have no resources to provide for themselves. Finally, there is a limited choice of facilities providing Medicaid-approved long term care.

How Can You Protect Your Family?
Whether you are concerned for your own long term care or that of your parents, good financial planning is critical.

There are a number of ways you can protect your assets and provide yourself some choices for long term care. A personal long term care plan may include self-insurance (social security and personal assets), long term care insurance, and outside assistance.

Whatever elements comprise the plan, it is important to allocate sufficient assets to allow a choice of better levels of nursing home and/or home health care.

What Is Long-Term Care Insurance?
Long-term care insurance is an insurance policy designed to protect you from the risk of financially devastating long term care costs. It is intended to cover catastrophic costs, not every last dollar of long term care.

There are now many options you can choose. You should evaluate the financial strength of the insuring company – its ability to pay your benefits in the future.

When evaluating this type of policy, you should consider your personal preferences: how much you can afford to pay, your desired level of independence, and other personal factors. You should also look for exclusions which might prevent your benefits from ever being paid. Your policy should also have certain minimum provisions, including:

     - No pre-hospitalization requirement. Many individuals go directly from their own homes to a nursing home. 
     - Coverage of all medical conditions, including Alzheimer’s disease, by a physician’s diagnosis. 
     - An adequate inflation provision. 
     - Examine the benefit triggers of the policy. Is it based on your ability to perform necessary activities of daily life? 
   

Do you have coverage in the event of cognitive impairment?
     - Guaranteed renewability, to protect you from having your policy cancelled. 
     - Admission to any level and any facility of care. There are three levels of care: skilled care, intermediate care, and custodial care. 

Consider purchasing such a policy sooner rather than later. If you are 50 years old, a policy could cost as little as $1,000 a year. If you are 79, it could cost as much as $4,000. Consider also that your health in the future years could prevent you from buying a policy at any price.

Is long term health care insurance worth the cost? If an annual premium for such a policy were $1,500, and you paid this amount for 15 years, you could receive the full value in only 9 months of long term care.

Are There Other Ways to Cover These Costs?
Life insurance policies with "living benefits" and long term care riders are options. Consult with a financial advisor before choosing such policies.

Are There Non-Institutional Options?
There are other options you may choose for long term care.

Home health care is preferred by many seniors, who would rather live at home for as long as possible. It can involve both medical care and personal care services. 

Other services available through community programs may include home care aides, adult day care, visiting nurses, Meals on Wheels, emergency response systems, community visitors, and transportation and shopping services. Costs vary widely, and most are not covered by Medicare.

Adult Congregate Living Facilities (ACLFs) provide a wide variety of services, including basic medical/nursing facilities, housekeeping, and personal care assistance.

The Personal Issues
The personal costs of long term care can be as devastating as the financial costs. For the adult child caring for the aging parent, there may be resentment that personal assets are being diverted to parental care and guilt over these feelings. There can also be conflict among siblings over the cost of parental care.

Finally, the parent faces a loss of personal pride and a fear of ill health and increasing independence, as well as financial worries.

Working out these feelings takes open discussion among family members. If you are not yet facing this situation, you should plan now for the eventuality of long term care.

The objective opinion of an appropriate financial advisor can protect you and your parents from becoming part of the troubling statistics facing the aging.

How do you get help?
If you would like professional answers to your questions, contact Terry Balding at (608) 837-9099 or tabalding@hirep.net.