Long-term care insurance: one of the best buys you can make

Planning for long-term care is an uncomfortable topic. It’s hard to come to grips with the fact that you—or your loved ones—might need it.

In fact, a 2012 Bank of America survey found that as of 2012, 68% of baby boomers had not purchased long-term care insurance for themselves or their spouse.

If you are among them, please consider the following statistics:

Median cost for a private room
in a Minnesota nursing home

• Approximately 70% of people over the age of 65 require some form of long-term care, and 30% will receive nursing home care, according to a 2010 survey by Prudential.
• The median annual cost for a private room in a Minnesota nursing home was $85,534, according to a 2012 Genworth Financial survey.
• The median annual cost for a home health aide in Minnesota was $57,772, according to the same study. If you need a licensed nurse, that cost would be significantly higher.

With those numbers in mind, long-term care insurance looks like a steal. The average premium for a long-term care policy in 2005 (the latest figure available) was $1,918, according to America’s Health Insurance Plans, an industry trade group. Long-term care insurance covers nursing home and/or home health care costs, up to a daily maximum.

What About Medicare and Medicaid?

If you find yourself in poor health and needing long-term care, under current law, Medicare is not going to come to your rescue. Medicare will pay only for medically necessary skilled nursing facility or home health care for up to 100 days if you meet certain conditions. After 20 days, you must pay a coinsurance, which was $137 per day in 2012.

In addition, Medicare does not pay home health aides to help with activities of daily living such as dressing, bathing, and using the bathroom.

Currently, Medicaid pays for certain nursing home care for seniors with low incomes and limited assets. In most states, Medicaid also pays for some long-term care services at home and in the community. Services and eligibility vary from state to state. Under current law, you would need to deplete your assets before you are eligible for Medicaid benefits.

According to AARP, about 65 percent of nursing home residents are supported primarily by Medicaid, and it pays for 45 percent of the total nursing home bill.

The Takeaway 

Most of us will need long-term care at some point in our lives. Paying for it can be devastating to your finances. Acquiring long-term care insurance is a relatively painless way to know that you and your loved ones are prepared.

Learn more about the types of long-term care insurance in this AARP article, and talk to your Wade Financial Group Wealth Advocate about whether you should acquire long-term care insurance.

From Bob Smrekar, AIF^®
Wealth Advocate

As a NAPFA-certified, fee-only Registered Investment Advisor, Wade Financial Group receives no commissions or other benefits based on recommendations of specific financial products, such as insurance.

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