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Part II: Long-Term Care – A Bigger Risk Than We Think

The recent failure of the CLASS act is drawing attention to a subject we tend to ignore or avoid – the possibility of costly long-term care in our future.  That possibility is growing with every life-saving medical advance that comes along.  How ironic is that!?  Today, in fact, the above-85-year-olds are the fastest growing population segment in the U.S.

Long-term care is defined as helping aged or disabled people with personal tasks like cooking, bathing, cleaning, feeding, shopping, toileting, and dressing.  The costs for long-term care vary depending on the service required but they add up fast; and if a full-time nursing facility is called for, the cost can be catastrophic.  Sad stories abound.  A recent New York Times article tells the story of a 61 year old Ohio resident whose wife was diagnosed with early-Alzheimer’s.  When she could no longer be cared for at home, she was moved into a nursing facility – the same one housing  her own aged parents.  The cost of her care, $7000 a month, is certain to rise as her disability worsens; and her husband fears there will be nothing left of their assets when he will need them.

Years ago the task of caring for the chronically ill fell to their families.  My mother had tuberculosis and died when she was only 30 leaving 3 children 10, 8, and 2 years old.  It was my grandmother who came to live with us and cared for us all, allowing my dad to continue working at his odd-hours job.   The idea then of someone being sent to “a home” was something dreadful.  It was a mark of either uncaring families or truly devastating circumstances.   But today’s far-flung families, broken marriages, working women, and the sheer number of people who need some degree of daily help make long-term care the new reality.

Unfortunately, it’s a reality remarkably few people are ready to face.  I was at a party last weekend when the subject came up.  The hostess, an active 70 year old,  related that after she had nursed her late husband through a long debilitating illness, she looked into long-term care insurance for her self.  “It’s too expensive!” she exclaimed and then joked, “I guess if my kids can’t take care of me, they’ll have to take me out and shoot me.”  All kidding aside, she’s decided to take her chances that she won’t end up like her husband.

10 years ago, when she was 73, my friend Dorothy had a similar experience.  She also looked into long-term care insurance after caring for her late husband during his long battle with lung cancer.  Of the two insurance companies she talked to, one declined her application because of a bout she had with cancer 10 years before; but the other offered her a policy for $4300 a year.  With it, she would be covered for daily expenses at a nursing facility or home care for a life-time limit of $131,400.  To cover the cost for the first couple of years, she asked her family to help pay for it in lieu of birthday and holiday gifts.  (“At my age, I don’t need anything else, she explained”)  After she moved into a smaller home, she was able to budget the amount into her own modest retirement income.  This inspired her daughter, Anne, to apply for her own long-term care insurance.  Because Anne is younger and healthy, she can expect to spend much less for her policy.

Long-term care insurance premiums depend on age, health, benefits, and length of time the policy-holder will wait before benefits can begin.  The deductible period (initial period of long-term care that is covered solely by the policy holder) and the presence of inflation-protection are other features that affect the premium price.

Most long-term care policies pay a fixed benefit amount on a daily, weekly, or monthly basis.  The benefit is a reimbursement of actual expenses and can be applied toward  in-home services, special enabling-devices or equipment, and assisted-living or nursing home facilities.  Insurance shoppers should look for policies that are “tax-qualified.”  Benefits from these plans are not taxable as income.  Once purchased, a policy can be returned in 30 days with any money spent refunded.

The Department of Health and Human Services predicts that 40% of the 65 year olds living today will require a nursing facility sometime during their lifetime.  10% of these will stay 5 years or more.  Most of us don’t think twice about purchasing house or car insurance to cover the risk of severe financial loss.  How is long-term care insurance any different?   It’s the one major health expense for which nearly all Americans are uninsured.  Less than 3% of Americans carry long-term care insurance despite the increasing odds of living longer and eventually requiring help with daily living tasks.

A tax incentive might help encourage more people to purchase this insurance; but expecting another government CLASS act is not in the cards given the enormous debt obligation we’re already facing.   This is one problem we as individuals and families need to be responsible for solving ourselves.


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