Protecting Your Financial Security
By Scott Culver
Communications Specialist
WEA Trust
February 2003
The face of long term care (LTC) is often that of an elderly person in
a wheelchair whiling away his or her twilight years in a nursing home.
We don’t envision working-age adults in the prime of life requiring
LTC. Yet 40% of those who need LTC are between the ages of 18 and 64.
This age group is more likely to face motor-vehicle accidents and illnesses
such as multiple sclerosis or cerebral palsy, which can require LTC.
The unpredictable nature of LTC means not planning for its possibility
can put your financial security at risk. You can attempt to pay for LTC
out of pocket, but it could take a large chunk out of your retirement
savings. Many people exhaust their life savings within months of entering
a nursing home.
Neither your health insurance nor a disability plan covers LTC expenses.
Medicaid, the state and federal insurance program for the poor, will include
LTC but only for people who meet the program’s stringent financial
requirements.
While long term care has become a familiar concept to most people, there’s
still a wide gap between having some idea of what LTC is and truly understanding
the cost and likelihood of needing LTC coverage. A recent American Association
of Retired Persons (AARP) survey found that a majority of Americans generally
do not know how much LTC services can cost (on average, $50,000 per year
for nursing-home care). And the general perception is that LTC doesn’t
become a real concern until after retirement.
These facts play a significant role in explaining why so few people have
coverage for what could become one of the most catastrophic financial
events of their lives – the need for LTC.
With health care costs continuing to rise, it’s important to understand
what LTC is, how much it could cost, and how best to plan for these costs.
What is LTC?
Long term care refers to a broad range of services that you might need
if an illness or injury left you unable to do everyday things like feeding
yourself, bathing, dressing, or getting in or out of bed. You would need
assistance, or long term care, if you were in this situation.
For the elderly, the effects of aging usually bring about the need for
care, either because they are physically unable to do everyday tasks or
because of cognitive disorders such as Alzheimer’s disease. For others,
a chronic disease or recuperation from an accident or illness may necessitate
LTC.
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.
What’s the cost for LTC?
The national average cost for a year in a nursing home is $50,000, depending
on your location, and is on the rise. Estimates are that by 2030, annual
costs for a nursing home stay will be $190,000.
You can find alternatives to nursing-home care, but your location, resources,
and level of care required may limit your choices. The cost of home care,
for example, can run upwards of $20,000 per year. In addition, if a family
member assists with your care, he or she may have to take time off work,
which adds to the real cost of the care.
Posted February 10, 2003