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Is long-term care insurance right
for you?
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| By Mark
Terry
• Bankrate.com |
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Given a choice, almost everybody would prefer to live out
their last days at home -- and in good health. Unfortunately, that doesn't always happen.
According to the National Center for Health Statistics, some 1.6 million people currently
reside in nursing homes. That number is likely to increase significantly as the baby boomer
generation continues to age.
Recent legislation makes it
harder for Americans of limited means to depend
on help from the government to pay for nursing
home costs through Medicaid. The Deficit Reduction
Act, signed into law in February 2006, tightens
restrictions for nursing-home eligibility
to anyone who gives away assets to charities
or family members for less than fair market
value. The so-called "look-back"
period for these asset transfers has been
extended from three years to five, and the
penalty period begins when someone applies
for Medicaid, rather than at the time of the
asset transfer, as was the case before.
For example, let's say that on March 1 of 2006, grandma
gave $55,000 to grandson Teddy to help pay college costs. To keep
it simple, let's imagine that grandma requires nursing-home care
within five years, in January of 2011, and that nursing home costs
in her state at that time run $55,000 a year. Her penalty period
begins in January 2011, when she needs care; before, it would have
begun in March 2006. As a result of this law, she will have to wait
a year before she becomes eligible for nursing-home care through
Medicaid, because the gift amount to Teddy equaled one year's worth
of nursing home costs. Under the old rules, her penalty period would
have expired in March of 2007.
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| Long-term care: What to know |
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In addition, single individuals with more than $500,000 in home equity
won't be eligible for Medicaid benefits (some states may raise that amount to
$750,000). Also, if Medicaid is used to pay for long-term care, the government
may become the patient's first beneficiary, before other heirs, with certain types
of assets.
A harsh
reality
A good nursing home -- especially one that specializes in Alzheimer's
disease or dementia care -- costs roughly the equivalent of a four- or five-star
hotel. The average cost of a nursing-home stay in the United States is $150 per
day. That adds up to about $4,562.50 a month, or $54,750 a year. This number varies
widely from state to state, with lows of around $99 a day (Louisiana) to highs
of $448 per day (Alaska). And the average length of stay in a nursing home facility
is about two-and-a-half years, according to the National Center for Health Statistics.
If
that isn't sobering enough, consider that the rate of medical inflation is between
10 percent and 15 percent a year, according to Paul Fronstin, director of the
Health Security and Quality Research program at the Employee Benefits Research
Institute.
That means, if the going rate for a nursing home
is $72,000 a year in your state now, in 10 years the price tag could be close
to $200,000.
"If you ask people, 'Are you prepared for
four years of long-term care at $200,000 a year?' they're going to say, 'Of course
not!'" says Joshua M. Barron, of JMB Financial Services Group LLC in Troy,
Mich. |
