The game may still be “life,” but many of the financial rules have changed. For one, the retirement planning equation is now the lifetime planning equation. That’s because costs, including those associated with long term care, may outpace the average retirement plan and create a whirlpool that sucks up hard-earned retirement assets. In years past, Medicaid provided a potential fallback option for covering long term care costs, but recent federal legislation has tightened qualifications and applicants are getting a closer look.
Many people are being pulled into this financial quicksand because they simply weren’t aware of two things: the true cost of long term care services and the fact that most long term care services aren’t covered by other health insurance plans.
Today, long term care is being delivered in many places other than nursing homes. Most people choose to receive care in their own homes, but assisted living facilities and adult day care facilities are also options. The services offered include help with functions associated with everyday living, such as showering, dressing and cooking meals. This care also includes the type of supervision an individual with cognitive impairment, such as that caused by Alzheimer’s disease, requires. Long term care can be provided over a period of months or years.
Naturally, the costs for long term care depend on the form of care chosen and level required. For example, the average annual cost for a private room in a nursing home is approximately $75,190, whereas the average private-pay rate for an individual residing in an assisted living facility is $2,905 per month, or $34,860 per year. While most Americans may know the cost of a Ford or BMW, they know little about long term care costs. A 2006 AARP study showed that 80 percent of Americans age 45 and older either don’t know or estimate well below the national average cost of $6,266 per month for nursing home care.
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Nonetheless, one fact is certain: these costs are not covered under health care policies and are only covered through Medicare under very specific circumstances. For those whose total assets amount to less than $75,000, Medicaid may still be a viable option. However, as previously noted, the federal government is taking a closer look at this program to help manage its costs and ensure those who receive benefits truly are needy.
Long term care insurance is designed to provide a daily benefit that offsets part or all of the costs of receiving care. However, this is only part of the value that LTCI delivers.
Increase the peace
First, there’s the financial peace of mind that LTCI offers to policyholders and their loved ones. When people secure LTCI, they’re establishing a personal financial safety net for care costs. Instead of draining their retirement assets or relying on the financial support of their loved ones, policyholders can be self-reliant as they realize the true benefit of their decision to insure. LTCI coverage prevents policyholders and their families from having to scramble to cover costs while their loved ones’ health and well being are jeopardized, along with their financial plans.