How financially devastating are the costs of long term care?

Phyllis Shelton is an expert on long-term care. In her book “Long-Term Care: Your Financial Planning Guide” she interviewed a financial columnist from the Chicago Sun-Times. His quote is most revealing:

“The most devastating thing that could happen to your financial future is not a bear market. It’s the need for long-term care - - for yourself, your spouse, or your parents.”
-Terry Savage, Chicago Sun-Times Financial Columnist

That will certainly cause you to stop and think. How many times have you worried about the return your investments are generating? Or been concerned that we are entering a recession and your stocks will not perform well?

Now think, how many times have you worried about what’s going to happen to all your investments and assets if you need long-term care?

If you’re like most people, you probably haven’t given it much thought. Or if you have thought about it, you might assume that your health plan or Medicare will cover your long-term care needs. It won’t cover your long-term care expenses. You have to take other actions to protect your assets and your independence.

If you think the chances of needing long-term care are low, think again.

You have a 1 in 1,200 chance of losing everything in a house fire. You have a 1 in 240 chance of a major auto accident. Would you go without home or auto insurance?

But you have a 1 in 2 chance (50%!) of needing long-term care at some point in your life.

So the important question at this point is, “If I have a 50% chance of needing long-term care, how expensive is it?”

An assisted living facility can be expensive, with a national average of $32,573 per year. In Tennessee you can expect to pay $27,409 per year on average.

The national average cost of home health care is estimated at over $48,282 per year. But in Tennessee the estimated annual cost of home health care is $42,094 based on 50 hours of care per week. That comes out to about $16.19 per hour for licensed care. If you need more than 50 hours of care a week, expect to pay more.

The nursing home is the most expensive route to go with long term care, but sometimes the only choice. If you live in Tennessee, the average annual cost of a nursing home stay is $59,276.

So let’s recap. If you live in Tennessee, these are the average annual costs you can expect to pay for different care:

Assisted Living Facility - $27,409
Home Health Care - $42,094
Nursing Home – $59,276

No wonder 70% of single people without long term care insurance are impoverished within one year of entering a nursing home. And 50% of couples are impoverished within a year after one spouse enters a nursing home.

That’s a staggering number. Everything these people worked for their whole life was gone in one year.

This doesn’t have to happen. There is protection against this risk.

My recommendation… If you have assets that are at risk of being wiped out by a long term care situation, look into protecting them. If you can afford it, the right long term care insurance policy will allow you to have dignified care and protect your hard earned assets.

Talk to a trusted insurance agent. You’ve got nothing to lose. If you don’t look into it, you’ve got a lot you could lose.

What is long-term care? Will your health insurance cover it?

Long-term care is care for people that have chronic conditions that show little or no progress. This could be medical care or non-medical care. Here’s an example… A man is driving, collides with another vehicle, but he survives. However, he is paralyzed. He will need LTC. His health insurance cannot be relied upon to pay for this LTC because, sadly, paralyzed people rarely show any progress of getting better.

Long-term care can be received in your home, at a nursing home, or at an assisted living facility. It can include medical care such as diabetes testing. It can also include non-medical care (also called custodial care) such as help with eating, dressing, bathing, and using the bathroom. The custodial care services can be delivered by non-medical personnel such as a wife, husband, relative or neighbor. The medical services will be provided by professionally trained medical personnel.

Long-term care is not just for old people. Young people can have accidents and need care. Do you remember Christopher Reeve? He was paralyzed in a horseback riding accident at the age of 43. He needed LTC. Michael J. Fox battled Parkinson’s disease for almost a decade before he retired from Spin City. He retired at the age of 38. He must have entered the first stages of Parkinson’s disease in his late 20’s!

Does health insurance cover long-term care? Not quite. Remember the person in the car accident I mentioned above. He couldn’t dress, feed, or bathe himself. Health insurance doesn’t cover having someone come to your home and help you dress every morning. It doesn’t pay for someone to be at your house to help you use the bathroom every time you need to go. In short… it doesn’t cover long-term care needs.

Medicare can’t be relied on to pay for long-term care needs. Most people think it will provide coverage. But Medicare is health insurance, not long-term care insurance. It will pay for some long-term care, such as skilled nursing for the first 100 days. But after 100 days, it’s done. And there are specific criteria that must be met to qualify for that coverage. If the criteria are not met, you’ll pay for the care out of your pocket.

Most people think of nursing homes when they think of long-term care. Most people will never go into a nursing home. This is not where the majority of long-term care happens. Most happens in the home. Most is administered by unpaid caregivers such as wives, husbands, and relatives. Most of the caregivers are financially and emotionally stressed out from the care giving.

Long-term care is not just nursing home care. The same is true of long-term care insurance. It is not just nursing home insurance. It helps you stay out of the nursing home. It helps the stressed-out, caregiver spouse by providing funds to hire additional home care services.

There are misconceptions of what long-term care and long-term care insurance is. These misunderstandings can cause serious problems when a person needs help. The wife realizes too late how hard it will be to care for her husband. An elderly woman discovers that Medicare will not pay for most of her custodial needs, such as bathing, dressing, and eating. A daughter finds out she must quit work to care for her father-in-law who can’t care for himself. A man spends down his assets on his care needs before qualifying for Medicaid, thus depleting the inheritance he was going to give to his children.

These situations will never be easy to face. But they can be prepared for if we take action early. Being informed is the key. If you are reading this blog, you have taken the first step.

Getting started – Why start another blog? Especially an insurance blog!

It all started when I realized how much wrong information is accepted as common knowledge about insurance. A majority of people do not know what kind of coverage they have, or don’t have, when it comes to their insurance policies. How do I know this? Because I used to be like that too.

Here’s a quick quiz:

· What is the annual deductible and total annual out-of-pocket max on your health policy?
· Is your emergency room co-pay really a flat fee of $50, or is it a flat fee of $50 after you’ve met your annual deductible?
· What are accelerated benefits and does your life insurance policy have them?
· Do you think your health care plan will cover you if you need long-term care?
· Do you think Medicare will pay for your long-term care needs?
· What’s the deductible on your homeowner’s insurance and what’s the max amount it will pay to rebuild your house if it was destroyed?

If you don’t know this, don’t worry…yet. I was in the same situation. I learned the hard way on the ER deductible question. My wife and I thought an ER visit was a flat $100, but it’s only $100 after we met our $2,000 deductible. We were stuck with a huge bill. I wasn’t in the insurance business at the time that happened. I had a group plan with my employer, and I didn’t check the benefits closely enough. I’m not making that mistake again on any type of insurance coverage I purchase. I need to know exactly what is covered and not covered. And so do you.

And that’s why I’ve started this blog. It’s an easy way for me to communicate to my clients, and anyone else that stumbles upon this blog. I can provide helpful information, free of charge.

The purpose of this blog will be to give Tennesseans (regulations vary by state) information so you’ll have the best coverage for life, health, Medicare, and long-term care insurance. I like to use real life examples (identities are protected of course) to show how insurance benefits work in practice. This way, you’ll know what to expect when the unexpected happens. You’ll also know which insurance benefits are the most important to get coverage for and which just sound good on paper.

We’ll look at different ways to make sure you have adequate coverage.