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Long-term care is expensive, so know your options

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According to the U.S. Department of Health and Human Services, almost 70 percent of individuals 65 or older will need some type of long-term care. Unfortunately, most families don’t have sufficient assets or insurance to cover the cost.

“Long-term care” can refer to a range of services, but for most it refers to assistance with activities of daily living (ADLs), which includes bathroom facilities, dressing, moving around, eating and dealing with incontinence. Many will need a nursing home or assisted living facility.

According to MetLife, in 2012 the average cost of assisted living nationwide was $3,550 per month. A private room in a nursing home cost $248 per day, and a semi-private room cost $222.

Many people believe — erroneously — that Medicare covers long-term care costs. In fact, Medicare coverage is limited to medically necessary skilled services or rehabilitative care, and is typically of much shorter duration than the typical long-term care scenario. Medicare does not pay for ADL services, which comprise most of long-term care demand.

Although Medicaid does cover some long-term care, most families will not qualify because of minimum income and asset requirements and rigid state requirements.

So how should you plan for the likelihood you will need long-term care? Here are some options:

Traditional long-term care policies. Long-term policies cost less if you purchase when you are younger and in good health. If you wait until you are 65, for example, the monthly premiums can be several hundred dollars a month per person insured. Certain health conditions may make you uninsurable.

Long-term care insurance makes sense for upper-middle-class families. For lower-income families, the insurance is too expensive. For the poor, Medicaid is available. The wealthy can afford to pay for long-term care. One disadvantage is that premiums are not necessarily fixed, even if you purchase the policy at a young age.

A good source of information is the American Association for Long-Term Care Insurance (www. aaltci.org or 818-597-3227).

A single premium policy. An individual makes a lump-sum payment. Based on the insured age and amount of deposit, a monthly benefit for LTC is determined. There is an initial life insurance benefit that decreases over time. After five years, if you haven’t filed a claim for benefits, you can request your initial investment back. Two firms offer this policy: Lincoln National and State Life.

Accelerated death benefits. Some insurance policies include a feature that allows a tax-free advance while you are alive. Such a feature would specify under what conditions you can obtain an advance. The policy will specify the limits of the advance, which can be limited to a percentage of the death benefit.

Life settlement. If you have a life policy with cash value, at some point (generally 70 or older) you can sell your policy regardless of your health. The disadvantages are that you are relinquishing your death benefit, and there may be income tax due. A good source of information is the Life Insurance Settlement Association (online at lisa.org).

The longer we live, the higher the probability we will need long-term care protection. It is prudent to discuss this issue with an insurance agent familiar with health-care issues.

Elliot Raphaelson welcomes your questions and comments at elliotraph@gmail.com.


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