Planning for Long-Term Care

By Scott Culver
Communications Specialist
WEA Trust

February 2002

While most people would be delighted at winning the lottery, they don’t count on such luck when planning for their retirement finances.

Instead, people follow more dependable methods. They stick to a budget, invest wisely, and save prudently. They don’t gamble on a cash windfall to fund their retirement or to cover their children’s education.

However, many Americans may be taking a chance with their financial security by overlooking an important aspect of a sound financial strategy: planning for long term care (LTC).

A recent AARP survey shows a majority of Americans age 45 and older do not know how much LTC services such as nursing home and home care cost. Many individuals also mistakenly believe the government or health insurance will cover LTC expenses. These misperceptions may help explain why the Health Insurance Association of America estimates that only about 6% of Americans have purchased LTC insurance policies.

LTC has drawn greater interest in recent years, but many people still do not have the necessary information on this important topic and don’t understand how it can affect their financial future and their independence.

What is LTC?
Long term care is for people who are cognitively impaired or who are incapacitated and regularly need assistance with certain everyday activities. For example, people who are unable to feed or bathe themselves or perform other necessary activities of daily living without help require services that constitute long term care.

This assistance can come from different sources in various settings. In recent years, more people have avoided nursing home care – at least for their initial LTC needs – preferring the independence provided through assisted-living facilities and home care.

Not everyone will need LTC, but the odds of requiring some type of LTC increase with age. Seven out of 10 couples will experience at least one partner entering a nursing facility in their lifetime, according to the New England Journal of Medicine.

And while it is true that LTC is generally more likely to be required in one’s later years, younger adults also require LTC, and in greater numbers than most people think. According to a U.S. General Accounting Office report, working-age adults, who are more likely to face motor-vehicle accidents and illnesses such as muscular dystrophy or multiple sclerosis, make up 40% of those using LTC services.

How would you pay for LTC?
Health insurance and Medicare do not include long term care coverage. Medicaid – the state and federal insurance program for the poor – does include LTC but only for people who meet the program’s financial requirements.

You can attempt to pay for LTC costs out of pocket, but it will take a big chunk out of your retirement savings. Most people exhaust their life savings within months of entering a nursing home. The average annual cost of nursing home care is $50,000. While home care is cheaper at $12,000 per year, it is still very costly for most families.

Another option to consider for dealing with LTC costs is insurance. The Trust offers two insurance programs to give all WEAC members access to LTC protection.

The first option is the group plan. It remains the most cost-effective and economical way for members to obtain LTC insurance. This plan has already been implemented in 86 school districts throughout the state. To get the group LTC plan, you must work with your negotiating team or union leaders because the group plan must be negotiated.

The group plan includes annual cost-of-living adjustments to ensure the value of the plan over time. It also allows you to choose where you receive care, including nursing facilities, adult day centers, community-based residential facilities, and even your own home. For more information, contact Randy Logan at the Trust at 1-800-279-4000.

For WEAC members who do not have the group plan available to them, the Trust offers an individual LTC program. This includes inactive or retired members and active members in districts that have not bargained for the group plan. Furthermore, the individual plan is available to the parents of members and their spouses. For more information, call 1-888-738-5835.

Long term care does not need to be a risk to your financial future. By planning for it, you can ensure that you won’t be gambling with your financial security.

Posted February 8, 2002