BASICS: Planning for end-of-life health care costs
- Fear and Denial. Most people will tell you they plan to live a long life. What they don’t want to talk about is the quality of that long life. With aging comes the need for help with some of the things they always did for themselves. Mental problems can place an elderly person in dangerous situations. There are many statistical projections regarding what percentage of those that reach 65 will need extended care for daily activities. They range from approximately 20% to 70%, depending on how “long-term care” is defined. Statistics are useless if it happens to you or a loved one. The point is, costs for long term care can seriously erode the extended family’s emotional and financial well-being. Sadly, unless a person or couple have actually had personal experience with the care of an elderly person, they are not likely to be receptive to discussing the risk of “taking too long to die”.
- LTC services are expensive. Cost-of-care studies revealed that just one year in a nursing home is almost certainly going to be a “five-figure” obligation. Home health care is less expensive, but people still can expect to pay as much as $36,000 to $40,000 per year for care they receive at home . Note that 24/7 skilled nursing at home can cost much more than facility care. Click here to find cost estimates for your particular area.
- You can’t rely on health insurance or Medicare. Many people mistakenly believe their LTC needs are already covered by private health insurance or government programs. In reality, health insurance doesn’t cover “custodial” services. And, Medicare is designed for short-term rehabilitation, not extended periods of skilled care.
- Medicaid (Medical in CA) is for the truly indigent. Medicaid does cover LTC services. But only for those who have virtually no income and very few assets. And, to qualify, one would have to enter a care facility – the Medicaid benefit for home care is currently under $300/month. One must now spend down non-excluded assets within 5 years of needing care, leaving the extended family with the spouse and/or extended family with spending retirement assets and providing hands-on care. Not an attractive option for people who want to protect the assets they worked a lifetime to accumulate. Also, not a good situation for the adult children and grandchildren that might have otherwise inherited some or all of the money spent for care.
- Spouses and adult children may not provide a quality level of care. It’s easy to say, “My family will take care of me.” But a spouse may not be physically able to provide all the care that’s needed. Most men are notoriously poor caregivers, making things particularly difficult for women who need at-home care. And, children have their own family and career obligations. The fact is family caregivers frequently suffer from stress and illness themselves. Not to mention lost wages if they have to give up a job or reduce work their hours.
- Planning is absolutely critical. How will you pay for the care you need? Where will you live? Who will take care of you? These are questions people need to ask themselves now while they’re young and in good health. The need for LTC services can arise at any time. Having a plan in place when that day comes can help alleviate the emotional strain many families face. It also can help ensure your clients get to make the important decisions about the care they receive and the setting they prefer.
- The cost of waiting can be high. The ability to obtain an long-term care insurance policy is based on age and good health. So it’s important for people to understand that if something happens to cause a change in health status, they may not be able to purchase LTCi at any price.
- Some coverage is better than none. Many people who think they can’t afford a long-term care insurance policy neglect to consider what would happen if they didn’t have one. Without a policy to help pay the bills for LTC services, they may have to liquidate assets, sell stocks, dip into savings or retirement accounts or sell property to come up with the cash they need. Even a modest LTCi policy can offset some (perhaps all) of the costs if the period of care turns out to be only a few months.
- Costs of long-term care insurance can be affordable. The latest offerings by insurance companies provide a wider range of options in designing coverage that provides both value and keeps costs low. In spite of some articles in trade magazines and the public press, long-term carriers are financially strong , committed to keeping their contractual promises, and will provide an even wider array of options to help keep policies in force when premium increases are necessary.
