Am I Prepared for Long-Term-Care Expenses?

Many Americans are not sufficiently prepared to face long-term care, yet they go through their lives reassuring themselves that they will probably never need it, and 42 percent are very or somewhat confident about being able to pay for long-term care if they do need it.¹

Unfortunately, if past trends continue, 43 percent of all Americans aged 65 and older will spend some time in a nursing home, and 21 percent of that group will stay for at least five years.² The average national cost of this care is currently $76,460 per year.³

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 for nursing home costs.

The cost of long-term care is not stable, however. If the trend continues, costs will rise with inflation.  So even if you have the resources to afford the 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. 

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, you’ll 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.

Sources: 1) 2009 Retirement Confidence Survey, Employee Benefit Research Institute; 2-3) 2009 Field Guide, National Underwriter

This material was written and prepared by Emerald.
© 2010 Emerald Publications

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