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Protection From the Perils of Aging

The news isn’t good. According to some experts, long-term care insurance, around in various forms since the 1970s, is too risky and too expensive for most people. But there are even more sobering facts. By 2020, one in every six Americans will be 65 or older, and by 2021, nursing home populations are expected to mushroom, since the oldest baby boomers will then be 75. The average rate for a private room in a nursing home is expected to be $480 per day or $175,200 per year. And with 60% of adults 65 and older needing nursing home care today, do the math to figure out how many of us will be in need 16 years from now.

Many think Medicaid, Medicare and Medigap will pay for long-term care needs. Not true. First of all, Medicaid is the federal government program that pays for the indigent. To qualify, assets must first be greatly diminished, and there are strict rules about transferring them to heirs within three years of needing a nursing home. Additionally, patients must then apply all of their remaining income before Medicaid will pick up any expenses. Medicare, also a government program, will pay 100% of skilled nursing in a nursing home for the first 20 days providing at least three days have been spent at the hospital for the same condition, the nursing home is certified and the skilled care is received within 30 days of the hospital discharge. From the 21st to the 100th day, Medicare will pay 100% of skilled nursing costs in the same facility except for a co-pay picked up by Medigap, a private insurance policy that supplements Medicare coverage.

But beyond day 100, you’re on your own.

There is much to consider when deciding whether or not to invest in a long-term care policy. Net worth (how much of it you’re willing to spend on healthcare and how much you’d like to leave to your heirs) is an important factor. Age and marital status are others. The United Seniors Health Council recommends policies be considered only by those whose assets are between $100,000 and a million dollars (excluding home and car), who expect to have an annual retirement income of at least $25,000 to $35,000 annually, who can pay premiums comfortably without lifestyles being adversely affected and who can absorb the inevitable premium increases without difficulty. A good rule of thumb is to ensure a premium does not exceed five percent of your current income. Indeed, long-term care insurance should not be purchased by those whose only source of income is a social security benefit or SSI (supplemental security income), if there are limited assets, if paying for daily living expenses like food, medicine and utilities is a stretch, if the premiums are unaffordable or if the policy doesn’t offer enough benefits to make it worthwhile.

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