Long Term Nursing Home Insurance Costs
long term nursing home insurance costs
Nursing Home Care paid by Medi-Cal for Middle Class Families
if I have to go into a nursing home, what assets will the government take before they will pay the costs?
Husband and I are in our late sixties and have no long term care insurance. We are in great health right now, but wonder about the pros and cons of buying this insurance. Will the gov take our investments and our home before they will pay for nursing home costs? We live in Iowa. Does the policy differ from state to state? Both our mothers lived to be 92, one still living at 92.
My understanding is each of you are allowed to keep burial insurance. Of course if one goes into nursing home, other can use assets such as home and auto. Also federal law now states any transferred five years or less prior to going into nursing home can be taken back from recipient. Certainly there are some differences from state to state but medicaid which pays for nursing home care is federal program. Recommend you consult estate lawyer for correct advice.
Should You Buy Long Term Care Insurance Part II
In Part I we showed how to assess the total amount we would be willing to pay for Long Term Care (LTC) insurance. We saw that there is a 40% chance of some spending some time in a nursing home. Although 64% of stays are for two months or less and 90% of stays are for one year or less, we should reconsider buying policies that provide coverage lasting for three years or more.
The average cost of a stay in a metropolitan area is roughly $100,000 a year for reasonable quality care and we most likely would not spend more than a year in the nursing home, this leaves our expected cost liability of $40,000 (100,000*.4). We would be willing pay up $40,000 in total premium to get rid of this liability. This best way to figure out what you will spend is to assume you will enter a nursing home at age 80. Therefore, if you are 60 you would be willing to pay up to $2,000 per year for 20 years to get coverage.
However, can we afford this? The premium paid is only part of the overall consideration. We also need to look at the potential hit on our net worth. If we are very wealthy and in the extreme could afford to pay the $100,000 without affecting our lifestyle, it may be best to self insure. Especially, since 64% of stays are for less than two month the likelihood is we would not incur the full $100,000. The high net worth may still want to consider coverage if it appears to be a good deal and they wish not to have any risk exposure.
At the opposite end of the wealth scale, if the premium payments would impoverish us, we should consider not purchasing LTC and opt for Medicaid or State sponsored coverage. Selecting government support limits our choices of where we could get coverage and most likely the care would not be as good as at the facilities that charge more. But, we will not feel the financial drain today for something that may not happen tomorrow.
This leaves the middle class as the most likely to consider LTC. If our wealth is under $1 million the impact of an extended stay in a nursing home could quickly deplete our resources. Imagine coughing up an extra $5,000 -$8,000 a month for a number of months. Not only will we have the additional expense, but we also lose income off the money we pay for the services. To make matters worse, we may have to take taxable income to pay for these expenses if we draw the funds from our IRA or by taking capital gains.
We need to look at the premium cost and the likely impact on our savings before making a decision. If our health and durability are questionable the chances of needing care will be greater than average the coverage may be a deal. If we are healthy and not inclined to purchase insurance at any cost, we still should make a conscious note of the impact on our savings should we need care and lack coverage.
Long Term Care cost like most other health care costs, are increasing faster than inflation. These costs could easily triple in the 20-30 years we will spend in retirement. If we postpone the purchase, there is the possibility we may get sick and no longer qualify for the coverage. The decision to buy LTC is both emotional and financial and we each need to find our own balance of whether we want to shift the risk to an insurance company or self insure.
