Written by Mary Welch Sunday, March 14 2010
|Long-Term Healthcare for the Elderly: Know the Facts|
Page 1 of 2Just looking at the numbers, it’s clear that you don’t have to be an actuary to realize that long-term health insurance is a good deal. But there are important questions to ask before purchasing long-term care insurance.
The average national cost in 2007 of one year in a private nursing home was nearly $75,000 ($205 per day), according to a survey of 11,000 nursing homes by Richmond, Va.-based Genworth Financial. Perhaps even more alarming than the price tag is that Americans think someone else will pay for it: Forty-four percent incorrectly believe that Medicare or private health insurance will pay for long-term care, according to Genworth.
Costs vary significantly by region: On average, those in the Northeast pay $40,000 more per year for nursing home care than those in the Midwest. Genworth found that the average annual cost of an assisted-living facility is $32,573 for a one-bedroom unit, up 13 percent in four years. Here, too, Northeasterners foot a bigger bill: $12,000 more per year than folks in the Southeast. The most expensive one-bedroom unit in the survey was found in Massachusetts for $4,753 per month; the least expensive was in North Dakota at $1,609 per month.
But staying at home doesn’t ease the wallet strain that much either. It can be just as expensive to stay at home. The average annual cost to receive 40 hours a week of home health care is $52,977 (based on an average hourly rate of $25.47). According to AARP, family and friends provide about 80 percent of the long-term care people receive at home. But when families need outside help with providing care, they discover that things can get expensive quite quickly.
Compounding the situation is that long-term care may be even more daunting for women, who tend to live longer and would be more likely to need help as they age.
“The odds are that you’re going to need it,” says Glenda Devechio, vice president of operations for Swerdlin & Co., Atlanta employee benefits firm. By 2030, all of the baby boomers will be over 65; that’s one-fifth of all Americans. Half of the people over 85 will need assistance. “Over the next few decades, we’ll see that 70 percent of the boomer population will need some sort of services, and 40 percent will need nursing care,” she says.
According to Annika Ferris, a partner with Brightworth, a private wealth counsel firm, there are four options when needing long-term medical assistance. The first is Medicare, which offers limited care options for a short period of time. Medicare will pay only for medically necessary skilled nursing facility or home health care for up to 100 days if you meet certain conditions. After 20 days, you must pay a co-insurance ($124 per day in 2007). And Medicare does not pay for home health aides to help with activities of daily living such as dressing, bathing, and using the bathroom.
“This is not a solution,” Ferris says.
Other options are long-term care insurance, funding it out of private savings, and Medicaid. “Paying it out of your savings is fine, as long as you have enough money,” she says. “The cost varies greatly, and there are a lot of dynamics in play. You can do a reverse mortgage on your home but there are a slew of considerations.”