For 77 million baby boomers rapidly approaching retirement, long-term elder care is no longer an academic concept – it's becoming a reality. Many of us already deal with elder-care issues for our parents.
If you're not familiar with long-term care it's time to get up to speed.
Long-term care refers to medical and non-medical services provided to chronically ill or disabled people who cannot care for themselves and includes performing normal tasks like bathing, dressing and taking medications.
Nursing homes used to be synonymous with long-term care, but no longer. Myriad choices now exist to help care for those who can no longer go it alone. There's also a dizzying array of ways to pay for it.
A recent AARP survey found that the vast majority of Americans greatly underestimate – or simply don't realize – how expensive long-term care is (a private nursing home room now costs an average of $75,000 a year). Many also believe long-term care is covered by public programs like Medicare, when in fact it often is not.
Consider these facts when mapping out your long-term care strategy:
Medicare. Medicare provides coverage for people over age 65, blind or disabled. Medicare Part A primarily covers hospitalization, Part B pays for most reasonable and necessary medical services, and Part D covers prescription drugs. (Part C allows people to receive Medicare benefits from private insurance plans.)
Although Part A will pay for 20 days of skilled nursing care immediately after hospitalization for conditions diagnosed during that hospital stay (and a small portion of the subsequent 80 days), it does not pay for longer-term care. Go to www.medicare.gov for details.
Medicaid. Jointly funded by state and federal governments, Medicaid pays medical bills and long-term care for low-income, elderly and disabled people of all ages. While Medicaid pays for custodial care in approved, state-run nursing homes, it rarely covers services in your own home or assisted-living facilities.
Medicaid has strict eligibility requirements: Participants usually must exhaust most of their assets and apply almost all income to their care before Medicaid will pay nursing-home bills. Each state administers its own plan, so rules and benefits vary. See www.cms.hhs.gov for details.
Long-term care insurance (LTCI). To supplement government-provided benefits and protect their retirement savings and other assets, many people purchase LTCI. A few tips:
- Most policies pay for care at home, in assisted living facilities or nursing homes.
- Find a policy that pays the same daily rate no matter where care is given.
- Purchase an inflation rider because your care costs will continue to rise after you've begun using the coverage.
- A portion of LTCI premiums is usually income tax-deductible as a medical expense.
- You may exclude up to $250 per day in LTCI payments from taxable income.
- Employer-provided group LTCI rates are often lower than individual policies.
The younger you are, the lower your LTCI rates will be and the more likely you are to qualify: Unfortunately, many pre-existing conditions and serious diseases cause eligibility disqualification, so investigate LTCI while still in good health.
AARP's website features a comprehensive overview of long-term care and other age-related health issues (www.aarp.org/families), as does Practical Money Skills for Life, a free personal financial management site sponsored by Visa Inc. (www.practicalmoneyskills.com/learn/life_events/retirement). As always, consult a financial professional regarding your particular situation.
Take the time now to investigate your long-term care options before the need strikes.
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