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Long-term care costs rise again

By Jennie L. Phipps ·
Tuesday, May 10, 2011
Posted: 3 pm ET

My Aunt Sissie was a tough old bird. She got married at 14, had a couple of kids, then divorced and took a job as a matron at the women's federal penitentiary in Alderson, W.Va., where for years she kept the inmates in line.

Even living in retirement, she wasn't the kind of woman to be triffled with. At 90, she was still swimming daily, buying her wrinkle cream from Walmart in the extra-large jars and keeping busy telling everybody what to do.

By the time she was 94, she had some physical problems and after years of supporting herself, didn't have enough money to pay for the nursing help she needed and ended up in a Medicaid-funded nursing home. Her roommate had dementia and screamed all day. Her belongings were stolen repeatedly. But the thing that bothered her the most was being tied to the bed so she couldn't get up and go to the bathroom.

It didn't take long. She was dead within a matter of months. After the funeral, I bought long-term care insurance, because I didn't want to be her.

Factor this into your retirement planning: The U.S. Department of Health and Human Services estimates that 70 percent of people over age 65 will require at least some type of long-term care during their lifetimes, with more than 40 percent needing a nursing home stay.

None of those services come cheap. Insurer Genworth Financial released the results of its annual cost-of-care survey this morning, reporting that median annual costs of long-term care are up again:

  • A year in an assisted living facility costs $39,135, up 2.4 percent from 2010.
  • A year in a private room in a nursing home room is $77,745, up 3.4 percent compared to last year.

Long-term care in a facility is primarily a woman's problem. More than 70 percent of nursing home residents are female, according the American Health Care Association. Many of these women exhaust themselves and their money taking care of their aging husbands and other family members, and then they struggle to get along on what's left.

Medicare doesn't pay for long-term care. Medicaid will pay, but in order to claim benefits, you must spend all but $2,000 of your money, including selling your home in many cases. Buying long-term care insurance will save you that indignity and help insure that you won't have to live in miserable circumstances or be a burden on your children in your final years.

Long-term care isn't cheap, but I think the peace of mind is worth the money.

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Jesse Slome
May 11, 2011 at 11:26 am

Mark, you did not say exactly what medical condition you had but most insurers will re-evaluate after a period of time has passed.

Insurance underwriting standards are important -- especially where long-term care insurance is concerned. That's because the potential payouts are so large. Without some health qualification, healthy people would be paying quite a bit more to cover the risk of many unhealthy people signing up.

A tip for folks with some health conditions (and who doesn't have something - after age 50): each company sets their own acceptable standards. That's why it pays to work with someone who has access to policies from multiple insurers.

Jesse Slome
Executive Director
American Association for Long-Term Care Insurance

Jesse Slome
May 11, 2011 at 10:11 am

I am always amazed at the people who say long-term care insurance isn't cheap. Every year the American Association for Long-Term Care Insurance prepares a price index. The 2011 survey found that a 55 year old couple can get excellent coverage for $100 a month (each) that will give them $821,500 of coverage when they reach age 85.

We also examine the largest claims still being paid. These are real people. The largest for a male has exceeded $1 million in benefits paid. His initial premium was $3,374 a year ... paid for 5 years until his claim started.

The largest for a woman has reached $1.5 million. Her policy premium was $881 a year which she paid for almost 14 years before going on claim.

I always say long-term care insurance is something you buy and hope you'll NEVER use (just like one hopes their house never burns down or their kids total the family car). But it's cheap protection if you need it.

Jesse Slome
Executive Director
American Association for Long-Term Care Insurance

May 11, 2011 at 7:36 am

The sad thing is that LTC insurance underwriting standards are a scam. Recently I looked into purchasing LTC (I was 29 at the time) because (in theory) the earlier you start paying the cheaper it would be. As it turns out if you have had any major medical treatment in your life you fall outside of what they would insure. I was turned down for coverage. That is, at 29 I was considered too much of a risk to be offered coverage at any premium.