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Understanding Long-Term Care Options

What is long-term care?

Long-term care refers to all kinds of help that people with chronic illnesses, disabilities or other conditions need to function each day over a long period of time. This care can be medical or non-medical and can be provided at home, in the community or in other living arrangements such as assisted living facilities or nursing homes.

We all know Americans are living longer and healthier lives thanks to advances in medical care and better diets. Yet no one is immune to the effects of aging or all of the different kinds of help they might need for an extended period of time. The risk of needing long-term care at age 50 is one in five. It grows to four in 10 by age 65. And, it’s seven in 10 at age 75.

Although younger people are included in the 11 million who currently receive some form of long-term care, the majority are in the older population. A study by the U.S. Department of Health and Human Services says that people reaching age 65 likely have a 40 percent chance of entering a nursing home, and about 10 percent of those will stay five years or more.

The average price in the United States for a private room in a nursing home is around $75,000 a year. If you choose an assisted living residence, you will pay on average around $35,000 a year.

Doesn’t private and government insurance cover long-term care?

Unfortunately, not in most cases. However, many people falsely feel they are already covered by Medicare, a Medicare supplement or other health insurance.

Without long-term care insurance, almost one-third of all bills are paid by individuals and families out of their own pockets.

Medicare primarily covers medical expenses, hospital bills, physician fees and up to 100 days for medically necessary care in a skilled nursing facility or home health care. “Medigap policies” pick up the deductibles and co-payments not paid by Medicare. Major medical insurance only covers acute care given in a hospital.

Medicaid, the other government program for people with low incomes and limited assets, pays for some long-term care services at home and in the community in most states. Eligibility is based on income and personal assets, so a person would have to liquidate all assets over $2,000 to qualify. In most states, it’s easier to qualify for food stamps than Medicaid!

What are the options in paying for long-term care?

  1. Take a chance that you’ll never need it
  2. Self-insure through personal savings and investments
  3. Liquidate assets down to poverty levels so Medicaid will cover
  4. Transfer the risk through private long-term care insurance

How does long-term care insurance work?

A long-term care insurance policy is designed to help cover expenses not covered by other means. You’ll pay a monthly premium, and when you need it, the policy will pay a specified dollar amount per day for the type of long-term care outlined in the policy you have chosen.

How much does it cost?

The cost depends on the type of policy that you purchase and includes the size of benefit, length of benefit period and any optional riders you select. For the most part, however, premiums are based on your age at the time you purchase the policy. As a result, the younger you are when you purchase a policy, the lower your premiums will be.

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