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Introductory Chapter |
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Martha |
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Martha was 78 years old, very active and in good health when her son Steve began talking to her about purchasing long-term care insurance. She refused to consider the coverage.
The insurance was expensive, she thought, and besides, if she bought a policy, maybe there would be some chance she would have to use it and end up in a nursing home. "I' d rather die than go to a nurs¬ing home," she told her son. Steve offered to pay the premiums for her, insisting that it would protect her assets. (Several years before, she had inherited $495,000 from a relative, and she planned to donate it all to her favorite charities upon her death.) Again, she refused.
A year later Martha began having a series of strokes and she did need skilled nursing care. Medicare paid for the first seven days and then stopped paying because her condition was not improving (Medicare requires that you are getting better to continue payment). She continued to need nursing home and home health care for 12 years. When she came home she continued paying for her home health care. In total, she spent the whole $495,000 on home care and nursing facilities.
Martha eventually ended up on Medicaid with no assets. Had Steve been successful in securing long-term care insurance for his mother before she became ill, the premium would have cost her a max¬imum of $4,000 for one year's coverage (before she started having strokes). Most likely she would have been able to help her charities with more than $500,000 of assets at her death. Medicaid spent more than $100,000 on her care before she died and liens against her residence paid off the expenses Medicaid incurred.
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Becky and Tom |
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Becky and Tom, a married couple, were in their late 30s when they realized that Becky was having trouble controlling her physical movements. After numerous medical tests, doctors determined that she was suffering from Huntington's chorea, a progressive disorder involving degeneration of nerve cells in the brain, a condition from which Becky's mother had died. This disorder, over a period of between three and twenty years, would render her totally incapable of caring for herself. Unfortunately, since Becky and Tom discovered this problem before talking to an insurance advisor, they were not able to find insurance to cover the costs of long-term care that Becky would need.
Sadly, these stories are not uncommon. We meet with people every day who want to purchase long¬term care insurance or make other arrangements to protect their assets after they find out a loved one has a serious health problem. As with any other insurance, once a problem has been discovered, it is usually too late to buy coverage. It is far wiser to plan ahead for long-term care needs while you're still young and healthy, and when you can purchase it at a preferred rate. Rates are not affected by advancing age once you have purchased coverage.
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What is the need for long-term care in this country? |
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Costs for long-term care escalated to $183 billion in 2003 in the U.S., according to the U.S. Government Accountability Office (GAO), and they estimate the cost will be $379 billion by 2050. Only about 2% of this expense is covered by Medicare. Medicaid (Medi-Cal in California) pays for approximately half of the remainder, but it requires that people exhaust nearly all of their resources before they are eligible for assistance. The other half of the cost is paid for by individuals and their families.
With an average cost in the U.S. of $203 per day ($74,095 per year) for a private room in a nursing home this can quickly become an impossible burden to pay. Annual expenditures range from $41,975 ($115 daily) in Louisiana to $193,815 in Alaska ($531 daily). Considering the average stay in a nursing home is two-and-a-half years, the cost for such a stay would average $177,828, depending on the type of facility and region of the country.l If you need home health care, costs can be approximately twice as much. These expenses can wipe out assets that a couple has spent a lifetime accumulating. In fact, the Congressional Subcommittee on Aging has determined that 70% to 80% of nursing home residents deplete their assets within 12 months of entering a facility.
Our population is aging - 36.3 million Americans, 12% of the population, are now over 65.2 By the year 2020 people 65 and over will account for about one in six Americans, or 17% of the population. 3 The numbers will continue to grow as the "baby boomer" generation (Americans born between 1946 and 1964) continues to age. The number of people over 65 will be close to 66 million, as reported by Time magazine. The percentage of people who live to "old, old" age is also increasing. Estimates by the Administration on Aging indicate that the percentage of people 85 and older will climb by as much as 250% by 2040, from 4.3 million today to 10.75 million.4 That age bracket is the fastest-growing segment of the American population today.
In 1998, 1.5 million people over age 65 lived full-time in some type of residential care facility. About 40% of the Americans currently age 65 and over will spend some time in a nursing home at some point in their lives. Of those who enter a nursing home, 50% will stay an average of 2.5 years, and 10% will stay there five years or longer. 5
We would never think of driving our cars uninsured, or not having fire insurance on our homes. Approximately 1.9 million people have already purchased private long-term care insurance, yet that number comprises only about 5.9% of Americans over age 65.6 Why wouldn't we want to protect ourselves from the most draining cost we could face over our lifetime, especially one with such a high probability of occurring?
Planning in advance for your long-term care needs, whether through a long-term care insurance policy or other methods such as reverse mortgages, special savings programs, life insurance policies with long-term care riders, or family and community support, must be undertaken by you. This book discusses the most important steps you can take to ensure your financial and emotional future.
The following chapters will explain
• Why long-term care involves the whole family
• What government programs (such as Medicare) cover
• What kinds of care are available
• What your options are for paying for long-term care
• How to select a plan.
Chapter 12 also discusses estate planning and its relationship to planning for long-term care.
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