The vast majority of Americans are not sufficiently prepared to face
long-term care. They go through their lives reassuring themselves that they
will probably never need it.
Unfortunately,
thats simply not the case. A study by the U.S. Department of
Health and Human Services indicates that people aged 65 face a 43 percent
lifetime risk of entering a nursing home. About 21 percent may stay there
five years or longer.¹ And according to the AARP, the average cost of
this care is \$56,000 per year.²
Also,
the odds that you will need some kind of long-term care increase as
you get older.
Self-Insurance as an
Option
To
self-insure that is, to bear the cost yourself you must have sufficient
income to pay the estimated \$56,000 or more per year for nursing-home
costs.
The
cost of long-term care is not stable, however. It is rising with
inflation and is expected to exceed \$148,000 per year in the next 20
years.³ So even if you have the resources to afford a \$56,000 yearly
expense now,
you may not be able to handle rising future costs without drastically
altering your lifestyle.
The Medicaid
Option
Medicaid
is a joint federal and state program that covers medical bills for
the needy. If you qualify, it will pay for your long-term-care costs.
Unfortunately, Medicaid is welfare. In order to qualify, youll have to spend
down your assets.
State
law determines the allowable income and resource limits. If you have
even one dollar of income or assets in excess of these limits, you will not
be eligible for Medicaid.
To
receive Medicaid assistance, youll have to transfer your assets to meet
those limits.
This
can be tricky, however, because there are tough laws designed to
discourage asset transfers for purposes of qualifying for Medicaid. If you
have engaged in any Medicaid planning, consult an advisor soon to discuss
the new Medicaid rules.
Long-Term-Care
Insurance
A
long-term-care insurance policy enables you to transfer a portion of the
economic liability of long-term care to an insurance company in exchange for
regular premiums.
Long-term-care
insurance can pay for skilled, intermediate, and custodial
nursing care. Some policies even pay for home health care. It can protect
your family from the potentially devastating cost of a long-term disability
or chronic illness.
Long-Term-Care Riders on
Life Insurance
A
number of insurance companies have added long-term-care riders to several
life insurance contracts. For an additional fee, these riders will provide a
benefit usually a percentage of the face value to help cover the cost of
long-term care.
© 2003 Emerald
Publications
Sources:
¹ 2002 Field Guide,
National Underwriter Company, 2002
² AARP, 2002
³ Assumes
5\% inflation over the 20-year period
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