Paying for long-term care (LTC) poses a serious dilemma for seniors according to a recent study by Boston College's Center for Retirement Research. Who needs LTC, what is the cost, who is supposed to pay for it, and who can afford it were issues addressed. Let's see some of the findings and what seniors can do.
Table 1 shows that three out of four 65 year olds (in 2005) were projected to need LTC in their future showing the imminent importance of LTC planning.
Directly paying for long-term care is expensive with average assisted-living facilities costing $30,000 to $40,000. Home health costs are in the $16-$20/hour range, and private nursing homes costs begin at around $70,000 per year. Such costs can wipe out a person’s savings and legacy.
Table 2, overall funding sources for LTC as of 2005, shows that 18% of dollars spent come from direct out-of-pocket payments by individuals. Medicaid pays most but only for those who have almost no assets, have spent down what assets they had, or had earlier divested themselves of their assets.
Only 7% of the dollars spent were paid through private insurance. LTC insurance is costly. Annual premiums are nearly $2,000 per person at age 65. And the expected LTC insurance dollar benefit for each premium paid is only $0.56 for men and $1.04 for women.
The study concluded that 91% of Americans cannot afford to pay for LTC insurance. It also concluded that many Americans mistakenly think government will pick up much of the LTC for everyone. This confusion and competing expenses prevents Americans from purchasing LTC insurance long before 65 when it costs much less. Lastly, long-term care insurance will remain a costly dilemma until government provides universal long-term insurance, or enough Americans purchase LTC insurance to spread the risk and lower premiums.
For now, seniors may try to see if they qualify for LTC insurance to see if it remains an option and typically the most affordable option. They should arrange for transferring their assets long before needing LTC to qualify for Medicaid. Lastly, they can look for LTC with other insurance combos that make paying premiums more palatable.