Spending on long-term care services is one of the fastest-growing sectors of the American economy. According to the American Health Care Association, nearly half of all Americans will need long-term care at some point in their lives and this care will be expensive.
In testimony before the U.S. Senate Special Committee on Aging in 2002, Comptroller General of the United States David M. Walker said long-term care spending from all public and private sources was about $137 billion for people of all ages in 2000. By some estimates, he said, “spending on long-term care services just for the elderly is projected to increase at least two-and-a-half times and could nearly quadruple” as the baby boomers and their children become elderly.
For some senior adults, long-term care insurance is an important part of their future health care plans. But for others, there are many misconceptions about long-term care policies and their benefits.
Barry Bledsoe, president of The Baptist Foundation of Alabama, believes long-term care insurance is beneficial for many people. He said people must decide, however, whether they want to pay for care out of their own assets or if they want to insure their care, allowing them to preserve those assets for other purposes, which might include charitable gifts, as well as gifts to family.
For example, Bledsoe said, the average cost of nursing home care is $4,000 per month. A person who has $750,000 in assets, which might include a home, retirement income and savings, could expect to use those to pay for his or her needs for at least 10 years but with a drastic reduction in assets. The depletion of assets could be slowed with a long-term care policy that pays part or all of those expenses.
The expense is determined in large part by what kind of care a person is seeking, said David Parsons, deputy commissioner of the Alabama Department of Insurance. “Some policies pay just for nursing home facilities, but most new policies are comprehensive and cover assisted living and home health care.”
Though there are many factors that determine decisions about long-term care insurance, there are several things to consider before deciding about a policy, including:
- Your assets. Individuals with less than $500,000 in assets should strongly consider purchasing a long-term care policy, Bledsoe said. Those with more assets may benefit less from the provisions of a long-term care policy.
- Your age. Though it’s never too early to start thinking about buying insurance, 50 is a good age to explore options, Bledsoe noted.
- Your needs. Provisions differ dramatically from policy to policy, so consider the monthly allowance a policy pays, whether the allowance is indexed for inflation, the number of years a policy will pay and whether the policy will pay for in-home care or assisted living.
- Your financial plans. Many people have enough money to pay for extended care. However, it can be hard to spend that money, and thus health care decisions can be affected by emotional and financial considerations.
- Your ability to pay for the insurance. Like other insurance policies, long-term care policies require a health exam, and a person’s health can affect the rate they pay. Someone who has had a heart attack could pay more for the same policy than someone who has not. Choices like self-paying for a period of time or limiting the years of coverge may reduce a policy’s monthly expense. “There are lots of different ways to work an insurance policy that will meet your needs into your budget,” Bledsoe said.
Parsons said consumers should confirm the insurance company and agent are licensed. He advises against responding to mail solicitations and premiums should be paid to a company, not an individual agent.
Bledsoe added that buyers might want to consult a tax adviser, because there may be state and/or federal tax incentives for purchasing a long-term care policy.
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