Long-term care is one of the least-understood areas of planning, and much of this misunderstanding has caused several myths to make the rounds. Some of these you may know, some you may believe, but all of them are nothing but myths.
Perhaps the most common argument against planning is the “I’ll never need it” mantra. Well, this could be true. But are you willing to risk it? Studies over time have consistently shown that approximately 70% of Americans over the age of 65 will need assistance with what are called Activities of Daily Living (ADLs). These may be due to an illness or injury, but might just as easily be the result of the aging process, and we can’t stop that. Vision, hearing loss, mobility, and the like are all risks of getting older. Still, you might be in that 30% minority, but let’s put that in perspective: if you’re on a plane, and the captain comes on and says there’s a 70% chance of making it to your destination, do you like those odds?
Another myth is the belief that long-term care requires an insurance policy. Of course, this is a great option for paying for costs if you can afford it, but it’s not the only option available, especially if you are in your 40s and can plan to save. Long-term care is what may or may not be necessitated by your health, and planning in advance can help to eliminate surprises. Planning now allows you to formulate how, via will or trust, your assets will be handled, and who will handle them.
The most commonly-held myth is that Medicare and/or Medicaid will pay for it. These federal and state programs may help pay for some costs, but both have strict rules in place. Medicare, for instance, will pay for the first 21 days of care, if hospitalized. The next 79 days have a copay feature, and after 100 days, you are expected to pay all costs. Medicaid can cover nursing home care, but only in the event you are truly destitute, and even then, there is no choice of facility. Based on availability, you or your loved one might be placed hundreds of miles away.
Are you one of those who believes that long-term care doesn’t cost that much? If so, you are in for a rude awakening. Even if you have the resources to pay, is that your plan? An April 2014 New York Life study found Detroit to be the 24th most expensive market in terms of nursing home costs, at a shade under $115,000 per year. (http://www.newyorklife.com/about/study-reveals-most-expensive-markets-for-ltc-coverage) And, these costs have escalated 20% on average every year since 2009. If you’re 50 years old, what will be the cost in 25 years? Even home-based care has grown at higher-than-inflation levels, and now averages around $22 an hour. Paying these costs are your family’s responsibility unless insurance is in place to help offset costs.
Not to worry: my family will take care of me. Yes, family members are the most common providers of care, and if you have them available, that’s a godsend. But can they provide all and any necessary services? Will your wife, for instance, be able to lift you out of bed and get you to your favorite chair? Will your children be available 24/7 at the risk of not seeing their own families or taking time from work? Which child will you choose to bathe you? The costs of care go far beyond dollars and cents. There’s the emotional cost of watching a loved one deteriorate. And the physical cost of stress and lack of sleep. Look into programs such as Meals on Wheels or other low-cost services. Contact your local Council on Aging for other assistance.
I don’t want to go to a nursing home. Sound familiar? No one wants to give up their home. And in most cases, that’s not necessary, but it will require some forethought. Nearly 87% of care is provided outside of a nursing home, most of it home-based. Maybe it’s planning for adult day-care, where you can mingle with others during the day, and return home at night. Or maybe, having a caregiver come in several hours a day to prepare meals, or do shopping, or clean is the best route. If you’re already receiving care, is your house been made more user-friendly? At some point you may need the nursing home, but the more you can stay home, the better for you and your family.
Finally, the myth that I can save enough on my own; I don’t need insurance in most cases will cause huge financial risks, to you and your family. Will the funds come from your retirement plan or pension? How will that impact the day-to-day lifestyle? Besides owning an insurance policy, other options, such as reverse mortgages, annuities, life insurance cash values and even life settlements may help to offset your care costs. And, if you’re on the downside of 50, is there enough time to save, while at the same time maintaining your family’s current lifestyle? The argument about insurance has always been “what if I don’t need it?” which is valid and has caused insurance companies to come up with alternatives, including life insurance policies with a long-term care element, and annuities with separate LTC accounts that can only be used if care is required.
For more information, visit LongTermCare.gov. Or plan to attend the symposium at the Grosse Pointe War Memorial on Jan. 24, sponsored by Pointes Professional Network.