5 Factors in Making Long-Term Care Decisions
Many people will need long-term care at some point in their life to perform daily activities such as bathing, dressing or feeding. Everyone should take some time to plan for what would happen in the event they need long-term care. Here are five factors to consider when making your plans:
- What’s the chance I’ll need long-term care? Nearly two-thirds of Americans will need some type of long-term care in their lifetime. The surprising fact is that 40 percent of the people who are using long-term care are between 18 to 64 years old.
- How much would long-term care cost? In Tennessee the cost to have someone come into your home to provide care averages $17 an hour, or approximately $40,000 a year. Assisted living, in which an individual lives independently but needs some help with bathing or dressing, is the most popular service. Costs for assisted living average around $36,000 a year. However, depending on the facility, the price can range anywhere from $2,600 to $7,300 a month. A private room in a nursing home in Tennessee costs approximately $64,000 a year (or $5,333 a month).
- How would I pay for these costs? You have four options for paying for long-term care. One is to self-insure and cover all expenses out of pocket. The second is Medicare. Many people believe this government program will cover all expenses, but that isn’t the case. Medicare pays for only 5-8 percent of all long-term care needs. The program is designed to cover skilled care, not custodial care like you would receive in an assisted-living facility or nursing home. The third option, Medicaid, is for someone who has spent down their assets to less than $2,000 and has a very low monthly income. That person has no freedom of choice about where the care is provided. The fourth alternative is a third-party payer or insurance company. You can get coverage from an insurance provider that would pay for long-term care needs.
- What does a typical long-term care policy cover, and what is the best age to consider purchasing one? A typical policy covers a range of services, such as homemaker services, home health care aides, adult day care, assisted living or nursing homes. The younger you are when you purchase a policy, the more affordable it is. That’s why it's recommend that people start considering policies around age 45, but the range is anywhere from 45 to 65 to keep it affordable.
- What’s the No. 1 mistake people make in the area of long-term care? No question, it’s failure to plan. Everyone needs to sit down with their spouse or children and begin making decisions about how to pay for long-term care should those needs arise.
One question that isn’t on this list is how much a typical long-term care insurance policy costs. That’s because there is no typical policy—there are too many variables to say with any certainty what the premium would be. An insurance advisor will be able to get an accurate quote for you after asking a few questions to determine your needs.