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's the cost, who's supposed to pay for it, and who can afford a long term care premium are all issues addressed in the study. Let's see some of the findings and what seniors can do as long term care issues are an essential part of your retirement plan.
Table 1 shows that three of four 65 year olds (in 2005) are projected to need LTC in their future showing the imminent importance of LTC planning.
|
Table 1: Projected future LTC needs of 65 year-olds (2005) |
|
|
long care needed |
% of projected |
|
No care |
31 |
|
2 years or less |
29 |
|
2-5 years |
20 |
|
5 years or more |
20 |
Directly paying for long-term care is expensive with average assisted-living facilities costing $30,000 to $40,000, home health costing in the $16 - $20/hour range and private nursing homes costs beginning at around $70,000 per year. Such costs can make a senior citizen retirement miserable. A long term care premium for insurance is the less expensive way to go.
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.
|
Table 2: Funding sources for LTC (2005) |
|
|
Entity paying for LTC |
% of dollars spent |
|
Medicaid |
50 |
|
Medicare |
20 |
|
Out-of-pocket |
18 |
|
Private Insurance |
7 |
|
Other |
5 |
Only 7% of dollars were paid through private insurance. long term care premiums for insurance are not inexpensive. Annual long term care 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 can't afford to pay LTC insurance premiums. It also concluded that many Americans mistakenly think government will pick up much of LTC for everyone. This confusion and competing expenses prevents Americans from purchasing long term care 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 long term care premiums.
For now, seniors may try to see if they qualify for LTC insurance to see if it remains an 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.
Check rates for a long term care premium using the long term care calculator.
Insurance professionals who can assist consumers with their LTC needs: ProspectMatch
You might also like:
I am suprised that the average benifit paid is low compareed to what people paid. You would think it would cost alot more because some illines could cost thousands every year.
Best etf funds lists last blog post..Bond etf.
I am suprised that the average benifit paid is low compareed to what people paid. You would think it would cost alot more because some illines could cost thousands every year.