| SUBSCRIBE | | Why we charge |
|
|
|
|
 E-mail Story Print Friendly
Most Requested
Who's Blogging?
Biz yourmoney |
Front Page
A healthy expenditure
By Lee Matthew / Illustration by Robin McClannahan
Long-term care insurance
Should you buy long-term care insurance?
biz yourmoney
E-mail a link to this story to a friend
SAGE October, 1999
Long-term care costs can waylay your retirement game plan if you don't take them into account
Planning for retirement often demands a fairly complex game plan.
Building financial assets, making lifestyle decisions, and addressing tax and estate planning concerns might all be part of the picture.
But your entire retirement game plan might be jeopardized if, in later years, you face a heavy outlay for nursing or home health care.
For many people, this has become a reality. According to a study by the American Health Care Association, 43 percent of people over age 65 are at risk of entering a nursing home sometime in their lives. And the U.S. General Accounting Office reports that for every two senior Americans receiving care in a nursing home, five others require regular assistance in a home care setting.
The risk for women is greater than for men. In the American Health Care Association study, 13 percent of the women, as opposed to 4 percent of the men, were projected to spend five or more years in a nursing home.
This kind of care is expensive. Today, the national average cost of nursing home care is about $40,000 a year. In New Mexico, current costs run about $3,100 a month, or $37,200 a year.
How would you pay for costs like these?
Many financial experts recommend long-term care insurance as a way to help you protect yourself from the high cost of long-term care.
Long-term care usually is associated with staying in a nursing home, but it actually includes a wide range of services aimed at helping people with chronic conditions continue to function as independently as possible. These services might include help with daily activities at home, home health care, adult day care and nursing home care.
A distinction often is made between "skilled" care and "personal" care.
Skilled care is given by medical professionals, such as registered nurses or professional therapists, and usually is provided 24 hours a day. Personal care includes assistance with activities of daily living (bathing, eating, dressing and so forth), and might be provided in nursing homes, adult day care centers, or at home.
Who pays for long-term care?
Few, if any, medical plans will pay for it. Nationally, one-third of nursing home expenses are paid for by individuals and their families. One-half is paid by state Me
dicaid programs.
Medicare doesn't pay for most long-term care. It will cover short-term skilled nursing care following a hospital stay, but it doesn't cover personal care or prolonged home care.
Medicaid generally will pay for long-term care if you have very little income and few assets, but your choice of long-term care services might be limited. Many people become eligible for Medicaid after they have used up their own financial resources by paying for long-term health care services.
If you're considering buying insurance to help cover the costs of long-term care, be sure to compare quotes from several companies. Examine each company and its policy features carefully.
Here's a checklist of things you might think about:
* How is the insuring company rated for financial strength?
* What is the benefit amount and length of time you would receive benefits?
* What is the elimination period (the waiting period before you would receive benefits)?
* Does the policy pay benefits by the day, or does it cover actual expenses? This is an important distinction, because you might be able to extend your benefit period if the company uses the actual expense approach.
* What are the "benefit triggers?" In other words, what does it take to start receiving benefits? Study the policy carefully for any restrictions or delays on payouts.
* Does the policy offer inflation protection? This is generally offered as an optional feature at a higher premium.
* What are the levels of care covered by the policy? Will it cover care in your home as well as assisted living and nursing home care? What about adult day care?
* Costs: What will you need to pay for all of this? Can you afford to pay the premiums every year? Remember that the company probably can increase the premiums in the future: Has it shown a pattern of increasing premiums in the past?
Ask yourself whether the need for long-term care would create financial hardship for you and your family. If not, then maybe you don't need it. For example, if you already qualify for Medicaid or might soon qualify, you probably shouldn't buy long-term care insurance. Or, if your existing financial assets could generate a continuing income stream large enough to cover the cost of long-term care, then the insurance might not be necessary.
In general, evaluate long-term care insurance as you would any other part of your retirement game plan.
Whether this sort of insurance is cost-effective for you will depend on your age, health, overall retirement objectives, income and assets.
Albuquerque Journal Subscriber Services
Submit a news tip | Place a classified ad | Advertise Online at ABQjournal | Advertise in Albuquerque Journal print products | Subscribe to newspaper
Save & Share
Tag this Page
| 
...go to bookmarks
