Long Term Care: Who Pays?
Provided by RBC Wealth Management and the Neuman Wealth Management Group
Food for thought…if you are age 65 or older, there is a 43 percent chance that you will spend a period greater than 90 days in a nursing care facility, according to the New England Journal of Medicine.
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Add to that the fact that U.S. nursing homes now charge approximately $ 75,000 on average annually, according to a study from Genworth Financial. The study showed that the average annual cost for a private room in a nursing home is $74,208, or $208 per day, a 4.7 percent boost over the past year and 4.3 percent annually over the past five years. The costs range from $50,594 in Louisiana to $125,925 in Connecticut, the highest in the contiental U.S. Overall, the Northeast is the most expensive region of the nation for nursing homes.
About 19 percent of Americans aged 65 and older experience some degree of chronic physical impairment, accoring to the FCIC. Among those aged 85 or older, the proportion of people who are impaired and require long-term care is about 55 percent. By the year 2020, 12 million older Americans will need long-term care. Most will be cared for at home; family members and friends are the sole caregivers for 70 percent of elderly people. But a study by the U.S. Department of Health and Human Services indicates that people age 65 face at least a 40 percent lifetime risk of entering a nursing home. About 10 percent will stay there five years or longer.
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A question you should ask yourself is who is going pay to the bills if you end up in a long-term care facility or require in-home skilled care? The answer will likely be you or your family. While many people assume Medicare will subsidize the cost, it typically only covers short periods of nursing-home care after a hospital stay. And Medicaid (public aid) kicks in only for low-income recipients – meaning your nest egg could be depleted because of an extended stay.
So how can you help protect yourself and your assets in the event you end up needing long-term care?
Long-term care insurance is one way to meet anticipated nursing home or long-term care needs. While policies differ, the insurance typically covers a person for a specified period of time, usually two to five years. The level of coverage you will need should be a function of the actual cost of care in your area. Policies vary between providers, so before selecting a plan you should review the type of benefits offered, cost of the premiums, duration of coverage, and the reputation of the provider.
Long-term care insurance is not the answer for everyone, but you should consider it if you have significant assets and income to protect and you want to pay for your own care or stay independent of the care of others.
However, depending on your assets, you may be better off “self-insuring” – paying out of pocket for nursing home costs. Long-term care insurance may not be right for you if you can’t comfortably afford the premiums or if your assets or income is limited.
Ultimately, there is no right answer and each person or couple should take the time to discuss this issue and determine what is right for their situation, finances and based on their family history. A financial consultant can help you decide which option best suits your specific needs.
This article is provided by Eric St. Martin, a Financial Advisor at RBC Wealth Management in Stillwater, MN, and was prepared by or in cooperation with RBC Wealth Management. The information included in this article is not intended to be used as the primary basis for making investment decisions nor should it be construed as a recommendation to buy or sell any specific security. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance. RBC Wealth Management does not provide tax or legal advice. For additional information, please visit www.neumanwmgroup.com.
RBC Wealth Management, a division of RBC Capital Markets LLC, Member NYSE/FINRA/SIPC
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