Wake Up America!!! Long-term care in the United States has become a necessary evil that every American will need to consider at some point in their life. The largest population of individuals in the country, those born from 1946 to 1964, began turning 65 in 2011 and by 2020 it is projected that some 12 million baby boomers will require long term care services.
Facility Based Care Services vs. Home and Community Based Services
Long term care becomes necessary when a person is no longer able to care for themselves without some level of assistance. This is determined by a person’s inability to perform any 2 of 6 activities of daily living or ADLs, those tasks we all perform without much thought or prompting. They include: (1) Bathing; (2) Continence; (3) Dressing; (4) Eating; (5) Toileting; and, (6) Transferring.
A person may receive care provided in a facility, as in the case of facility based care services or in the home known as home and community based services. Facility based services are those found in a nursing home or assisted living facility. Home and community based services include having a person come into the home to provide aid or being transported to a facility such as adult day care. The type of long-term care services needed depends on the individual’s ability and level of assistance needed.
The Cost of Long-Term Care
Costing out long-term care is easy to do although the results will probably not bring much comfort to your pocketbook. Companies like John Hancock conduct annual cost surveys to determine what long-term care costs. Nationally a person receiving care in a nursing home will pay on average $258 a day for a private room or $227 for a semi-private room. Assisted living facilities charge around $113 a day for the services they provide. Annually, these costs are:
- $94,170 for a private nursing home room
- $82,855 for a semi-private nursing home room
- $41,125 for assisted living care
These costs are seen rising on average over a 5 year period between 2 and 4 percent. Twice the average rate of inflation!
Home and community based services such as a home health aide to assist with the performance of those activities of daily living or time at a community based adult day care center can cost $114 and $71 a day respectively. In a year’s time, based on a 5 day a week utilization of these services and up to 30 hours a week of the home health aide’s time, these costs are $29,640 (home health aide) and $18,460 (adult day care). These costs are rising at a lower rate than facility based care at around 1.5 percent annually over 5 years. Costs specific to the area where you live can be found here.
Debunking the Payment Myth
The biggest myth about long-term care is that Medicare, the social insurance program for individuals age 65 and older, pays for long-term care. Nope. This myth is not helped by the fact that Medicaid, the program for low-income and certain other individuals (without regard to age) does pay for long-term care. What’s worse is when advisors counsel clients to spend down or gift away assets in order to meet the income requirements to qualify for Medicaid. NOPE!
When faced with the prospect of long-term care services for yourself or a loved one, the options available include long-term care insurance, a long-term care rider added to an annuity or life insurance policy, a deferred annuity or the use of personal assets to meet the need for these services. Annuities can be used, to either pay premiums on a long-term care policy or help defray costs associated with these services, sometime on a tax-free or tax-favorable basis.
Annuities provide a way to preserve principal and protect individuals from outliving their money. There’s a saying in the financial community that goes, “Tell me how long you are going to live and I’ll tell you how much money you need!” Of course most planners (alright no planner) has a crystal ball at their avail or a clairvoyant insight into a person’s longevity. What a good planner should be able to do, however, is provide you with the tools to help your money meet your needs for as long as those needs have to be met. Have a discussion with an advisor who can walk you through the best options for long-term care, including those using annuities.
To learn more from this annuity professional, simply click here (Todd Heckman).
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