Most people will need long term care
Do you know how you will pay for yours?
The good news is, overall, we’re living longer. But the bad news is, many of us will live longer but only with the assistance of a nursing home or at a minimum, home health aides. What’s the likelihood you or someone you love will require long-term care?
According to the government website, http://www.longtermcare.gov, adults who are 65 years old today have nearly a 70 percent chance of needing some type of long-term care (LTC) services and support in their remaining years. Men average 2.2 years in long-term care, while women spend an average of 3.7 years there. A full 20 percent of people who enter LTC will need it for five years or more.
Of course, you don’t have to be in your sixth decade to need long term care. About 40 percent of people who are currently receiving LTC are under 65 years old. Strokes, accidents, multiple sclerosis, brain tumors, and Parkinson’s disease render many people helpless long before they reach retirement age.
The costs associated with this care can be exorbitant, and Medicare pays only a small amount, and only under specific conditions (see sidebar at right). How much could that cost, you may ask?
Here are the latest median figures from the Genworth Financial 2015 survey.
• $3,600 per month for an assisted living facility, $43,200 for a year.
• $250 per day for a private room in a nursing home. $91,250 for a year.
• $220 per day for a semi-private room in a nursing home, $80,300 for a year.
• $20 per hour for a non-Medicare home health aide, for “hands on” personal care, but not medical care, or for homemaker services, defined as “hands off” care, like cleaning, cooking, errands.
• $69 a day for adult day health care (ADC). This is a safe environment for seniors who cannot stay alone during the day while their kids or spouses work. Some ADCs also provide personal care, transportation, medical management and meals.
Remember, these are only averages. Some states are less, but some are shockingly higher. Residents of Alaska who require nursing home care can expect to pay a median bill of $771 per day for a private room, or $281,415. See the average cost in your state by going to http://www.genworth.com, then choose your state.
It probably will not surprise you to learn that the cost of purchasing LTC insurance rises dramatically as you age. At some point you may not be able to get it at all. In fact, some insurers have stopped offering it because the payout can be enormous. However, given the likelihood of needing LTC at some time in your life, it’s something to consider. To help defray the cost a little bit, there is a tax break associated with LTC insurance.
How much can you deduct?
When tax time rolls around, the amounts you pay as premiums for LTC insurance may yield a deduction on your federal taxes, to a point. The deductible amount depends on your age on the last day of the year.
The maximum amount you can deduct on your 2016 tax return is:
• $390 if you are age 40 or under.
• $730 if you are age 41 to 50.
• $1,460 if you are age 51 to 60.
• $3,900 if you are age 61 to 70.
• $4,870 if you are over age 70.
There may also be a state deduction available.
If you shop for a policy
If you’ve decided to buy LTC insurance, here is some guidance you need to consider. Because this is an insurance that you may have for decades before using, it’s critical to choose an insurer with a reputation for stability and strength.
In addition, ask these questions:
• How will inflation affect your coverage at the time you need it?
• How long is the waiting period between initiating the policy and your ability to be covered? In other words, if you buy a policy today and have a car accident next month that renders you helpless, will the policy pay?
• Does the policy pay actual costs, or “customary and reasonable?”
• What documentation will you have to provide to prove your need? Some companies require you to see their doctors, not yours.
• Can the policy be shared between spouses? Are their riders available to allow one spouse to use unused benefits of the other?
The purchase of LTC insurance can give you great peace of mind about your future. So shop carefully, but don’t wait too long. Nobody is guaranteed a healthy tomorrow.
What will Medicare cover if you need long-term care?
The largest part of long-term care is not covered by Medicare. However a short stay in a skilled nursing facility or for hospice care or home health care may be covered, if you meet these conditions:
• You have had a recent prior hospital stay of at least three days
• You are admitted to a Medicare-certified nursing facility within 30 days of your prior hospital stay.
• You need skilled care, such as skilled nursing services, physical therapy, or other types of therapy.
If all of these conditions are met, Medicare will generally pay some of your costs for up to 100 days. For the first 20 days, 100 percent will be covered. For the remaining days, 21-100, you will pay your own expenses up to $140 per day and Medicare pays the balance. After day 100 you must pay 100 percent of the cost of your stay in a skilled nursing facility.