Alternatives to Long Term Care Insurance
Paying for Long Term Care
Some time ago, Baby Boomer Concerns published an article titles, The Pros and Cons of Long Term Care Insurance. Readers asked for more information about long term care insurance alternatives. Obviously, these readers already know that long term care is expensive and the costs have been increasing pretty steadily each year. Planning for the cost of long term care solutions like nursing homes, assisted living, and home health care aids only seems wise, but people need some good strategies for ways to plan.
Before considering some alternatives to long term care insurance, it might be useful to understand the potential costs of paying for a variety of different types of health care that elderly and disabled people might need. LongTermCare.gov is published by the U.S. Department of Health and Human Services, and they post from estimated costs from 2010. Understand that these are averages, and they might vary a lot in different parts of the country and even for different facilities in the same city.
Average costs of long term care in 2010:
- Skilled nursing home: $205 a day (semi-private room)
- Assisted living:$100+ a day
- Home health care: $21 an hour
- Adult day care:$69 a day
How can people plan for their retirement which may or may not include a bill that costs thousands of dollars a month? Keep in mind that Medicare does NOT cover most long term care. It may pay for associated medical services and therapy services, but it will not pay for long term residential care. Medicaid might pick up the bill, but it is restricted to people who have already spent most of their money, have very low incomes, and to certain facilities that accept Medicaid payments.
Alternative Ways to Plan for the Cost of Long Term Care
Of course, Medicaid does pick up the tab for many Americans who need long term care. This is usually only after those individuals spent down their savings. People who want to maintain an estate for their heirs and beneficiaries do need to plan as well as they can.Relying upon Medicaid may not be the best way to plan to pay for long term care.
The best way to pay for long term care really depends upon the individual. One issue with LTCI is that the premiums might be wasted if the covered person never actually needs to use his policy. Other options might perform other functions that can help with savings or estate planning. Some alternative ways to plan for the cost of assisted living, home health care, or nursing homes include:
- Savings or trusts: Again, the bills may be much longer than any retiree ever expected to spend for a normal month of expenses. This is great for people who manage to retire with a very large pile of savings, but it is not realistic for most middle-class people.
- Annuities and Life insurance: Both annuities and permanent life insurance policies may have clauses in them that make the cash or even the death benefit accessible for a variety of reasons while the owner is still alive. For example, some universal or whole life insurance policies have accelerated death benefits, or they can be sold in a senior life settlement.
- Medicaid: This is the federal government health plan for people with low incomes and few assets. Sadly, this is how many elderly people end up. Qualification rules differ by state, but Medicaid picks up the bill for many elderly and disabled people’s nursing, assisted living, or home health care. According to the Kaiser Family Foundation, Medicaid pays for 43 percent of all long term care expenses in the U.S.
- Reverse Mortgages: If you still live in your home and get home health care, or a spouse still lives in the home, a reverse mortgage might be a solution to helping to pay long term care costs.In any case, it would require a fairly large amount of equity in a home. Reverse mortgages are not for everybody, but according to LongTermCare.gov, they do not count as income for Medicaid.
What is the Best Way to Pay for Long Term Care?
The right solution really depends upon the circumstances of the family and individual. Long term care insurance policies are expensive and confusing, but they can be very handy. An annuity or cash value life insurance policy can also be a very handy thing to have in hand. The advantage is they can still be used to transfer estates or fund a retirement even if the owner never needs long term care, and that’s a good way to hedge bets.
Of course, a big pile of cash is best, but that is not always easy to accumulate.