Six Answers about You and Long Term Care

Long term care of elderly is everyone's concern since it will most likely affect you or a loved one. In this article I'll respond to 6 questions that encompass your long term care (LTC) concerns: What is LTC? Who needs it? Who provides help for it? What's the cost? Who pays for it? What should you do about LTC?

What is LTC?

You need LTC when you need help carrying out your activities of daily living (ADLs) for the foreseeable future. For seniors, this most likely means for the rest of their lives. Examples of ADLs are dressing, bathing, toileting, eating, transferring from bed to bathroom and continence.

Who needs LTC?

Boston College's Center for Retirement Research (BCCRR) (http://crr.bc.edu/images/stories/Briefs/20&ib;_7-13.pdf.) found that three of every four 65 year olds are projected to need LTC in their future. The percent breakdown of elderly needing LTC will be:

31% - no care

29% - 2 years or less

20% - 2 to 5 years

20% - 5 years or more

Who provides help for LTC?

Long term caregivers do. They're either skilled or custodial caregivers. Custodial caregivers are typically family or friends, volunteers, or paid helpers. Heath care plans pay for skilled caregivers (i.e. medical specialists like doctors, nurses, etc.) but only for custodial services if these are given as part of a skilled care procedure.

You receive LTC in your home, at an adult day center, an assisted living facility, a hospice facility or at a nursing home.

What's the cost of LTC?

The cost for LTC services depends on where you're living and what level of long term care you're getting. Approximate annual costs may be $25,000 for home care at home; $40,000 for an assisted living base rate; and $80,000 or more for nursing home costs. These costs can cut deeply into your savings or legacy.

Who pays for LTC costs?

The BCCRR study shows that 18% of dollars spent on LTC come from direct out-of-pocket payments by individuals. Medicaid pays about 50% of LTC costs but only for those who have almost no assets since Medicaid is for the poor. Medicare paid 20% probably as transition costs only since Medicare is not intended to pay continual LTC costs. Only 7% of LTC dollars were paid for by private LTC insurance policies.

What should you do about LTC?

Clearly, you or a loved one will probably need some long term care in the last stages of life. And it's very costly. It can wipe out all your savings or legacy if you require a year or more of it. So you need to plan for how you can handle paying your LTC costs.

Three options for paying for LTC are:

1. Pay it out of your pocket (i.e. your own savings)

2. Buy LTC insurance so the insurance can pay it

3. Let Medicare pay it.

Paying for LTC yourself requires having a lot of money - enough earnings on your money to not jeopardize losing all your savings and legacy. Perhaps you should have at least $750,000 not including your home.

If you buy LTC insurance, you'll have to pay premiums each year. This is more costly the older you are when you start paying them. You get tax breaks for premiums paid. But starting earlier makes premiums less.

Medicaid will pay a person's LTC costs but only if they're unable to contribute their own money or assets to what Medicaid pays for you. Only until you have less than about $3,000, will Medicare pay for you at no cost to you. But you can't just transfer all your assets to loved ones one day and apply for Medicaid the next. You must transfer your assets away some 5 years earlier than when you apply.

So you can see that you need to look into what is the best strategy for you. Depending on your age and wealth you can find a strategy that minimizes your loss of wealth for dealing with the probability of needing LTC.

If you plan early and transfer assets away early, you can possibly save a fortune for you beneficiaries.