Did you know of Americans aged 65 and over, 1 in 8 has Alzheimer's disease, and nearly half of people aged 85 and older have the disease? In 2009, 146,000 older Ohioans had a severe disability and that number will almost double by 2040. The U.S. Department of Health and Human Services says 70 percent of people over age 65 will need some type of long-term care, either home assistance or a stay in an assisted living facility or nursing home. You may not think a nursing home stay is in your future, but in reality, you are one accident or one diagnosis from needing more care than your family or friends will be able to provide. And the costs of long-term care can be staggering - from an average of $75,000 a year for a room in a nursing home to $19 per hour for a non-Medicare certified, state licensed home health aide.
The federal government, recognizing the need for planning to pay for long-term care, added a provision in the health reform law that would have created a long-term care insurance program called the Community Living Assistance Services and Supports (CLASS) Act. After months of study, the administration determined that the program, as written, was unsustainable, but that does not lessen the importance of planning for long-term care.
Most of us want to age in place, in our own homes and communities. When you plan for long-term care, either for yourself or for loved ones, you ensure the person's choices can realistically be met, while maintaining as much personal independence as possible and assuring both quality of care and quality of life. Planning for long-term care needs can mean checking into all the resources available in your community, such as home care, adult day care, continuing care communities, assisted living programs and nursing homes. It means investigating the cost of these services and facilities and determining what resources you have to cover those costs.
Surveys show that many people mistakenly think that Medicare or their health insurance will cover long-term care costs. However, Medicare covers only a percentage of the cost of up to 100 days in a rehabilitation facility. Most health insurance policies don't cover long-term care services. Ohio's Medicaid program will cover most types of long-term care, but only after you have exhausted all of your personal assets to pay for it.
Ideally, people would buy insurance to protect themselves against the costs of long-term care, but few young or middle-age people think they need such coverage, or are willing and able to pay for it. Less than three percent of Americans have private long-term care policies. A long-term care insurance policy can help you cover costs before you need the care, but only if it is well-suited for your situation. An Ohio program allows you to buy long-term care partnership policies, receive benefits from the policy and protect a matching amount of assets if you continue to need care and apply for Medicaid. With these policies, once you've exceeded the limit of coverage purchased, you can apply for Medicaid, but for every dollar you used in benefits, you'll be able to protect a dollar of assets from Medicaid. For more information on long-term care partnership policies, visit www.ltc4me.ohio.gov.
While generally cheaper than out-of-pocket expenses for long-term care, long-term care insurance premiums can be quite high. The cost will depend on your age when you buy the policy, as well as other factors. Examining your family medical history and your own health, with your doctor's input, can help you determine how likely is it that you will need long-term care at some point in your future. If you are pretty healthy and have mostly healthy habits, you may be less likely to need a home health aide or nursing home services. Experts estimate that three people in ten won't need any long-term care assistance at all. However, if you have or had older relatives who had to access long-term care due to chronic or hereditary conditions, it may be more likely in your future.
There are alternatives to ensure some savings are dedicated to the potential need for long-term care:
- Some annuities offer a long-term care rider. However, they require a hefty up-front premium and lock that money up for five to 10 years, with steep penalties for withdrawals.
- A reverse mortgage is a special type of home equity loan that is available to homeowners age 62 and older. You can use the income in almost any way you choose, including as a resource to pay for medical or long-term care. However, a reverse mortgage can be complicated and usually has significant upfront costs.
- Through the Aid and Attendance program, the Department of Veterans Affairs pays a certain amount per month for home-based care or care in a facility for single vets, married veterans and their spouses and surviving spouses.
Talk to your insurance agent and banker to see what options may be right for you.
There is no "right" answer to the question of how to finance any long-term care you may need. However, there is a wrong answer: not planning at all. The sooner you begin thinking and planning for a time when you may require long-term care, the better prepared you will be when, or if, a need arises.
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