Study shows long term care - though needed - is often too costly for seniors
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 it were issues addressed. Let's see some of the findings and what seniors can do to afford long term care rates.
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.
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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 wipe out a person's savings and legacy. No one will argue that the long term care rates are not affordable by most.
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.
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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 insurance rates are high. 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. For the latest figures, use the long term care calculator. To check the percentage of your income that long term care costs could consume, use the retirement income calculators.
The study concluded that 91% of Americans can't afford to pay current long term care rates. It also concluded that many Americans mistakenly think government will pick up much of long term care cost 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 rates will remain a costly dilemma until government provides universal long term insurance or enough Americans purchase long term care insurance to spread the risk and lower premiums.
For now, seniors may try to see if they qualify for long term care insurance to see if it remains an option. They should consider, through consultation with an elder law attorney, transferring their assets long before needing long term care to qualify for Medicaid. Lastly, they can look for long term care rates with other insurance combos that make paying premiums more palatable (e.g. life/long term care combination policies).
For insurance professionals who can help consumers with their long term care concerns: ProspectMatch
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The amount of money it cost for long term care amazes me. You would figure that the homes have so many people in them the cost should go down more than they are. Most people will never have enough money left to pay for it.
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