Why Long-Term Care Insurance ?

About 70% of people over 65 will need some sort of long-term care. It may be temporary, but it can be expensive.  It is also important to remember that is not a reimbursable expense under Medicare, unless the stay is under 100 days, says Nola.com’s recent article entitled “Facing up to the financial realities of elder care.”

A year in an assisted living facility during that same period is about $55,000 a year, on average, nationwide. Hiring an hourly home health aide (based on a 44-hour workweek) costs $60,000 a year.

While there is the option of long-term care insurance, it must be purchased when you’re still young to make the premiums affordable. Denials are also frequent for those with pre-existing conditions, like diabetes, heart disease, or obesity. Dementia is an automatic rejection by insurers. A major variable in the price is the amount you want the policy to cover, and for what duration. The average price for premiums if you’re 55 years old is about $2,200 a year for $200 in benefits a day (although a private room in a nursing home costs around $300 a day). Women, traditionally, are more expensive to insure because they live longer. If you delay until you’re 70 to buy long-term care insurance, a man’s premiums are about $5,000 a year, while a woman’s is over $7,000.

There are alternatives to buying long-term care insurance. However, it means investing retirement money early enough to cover the rising cost of being a resident in an out-of-home facility.

In many states, Medicaid will cover nursing care only after you’ve depleted any savings down to $2,000 or so. That would mean depleting all of your retirement savings before becoming eligible. However, before you think you can just give your money away after a diagnosis, the state has a look-back period. That means the state can “look back” over a certain time before applying (usually five years) to determine whether monies were given away at less than fair market value. This will deny your Medicaid application.

At the current rate of inflation and with continually rising healthcare costs, by 2050, a private room at a nursing facility for a year will cost well over $300,000. That’s a figure that will break most people’s banks.

Reference: Nola.com (Oct. 14, 2022) “Facing up to the financial realities of elder care”