Imagine carefully saving money for your retirement over many years, building up a nice nest egg, only to have it all wiped out quickly when you or a spouse has an illness that requires full-time health care at home or in a nursing home.
Costs for nursing home care aren’t covered by regular health insurance policies.
In Mississippi the average cost of nursing home care for a year is $38,000. In other areas of the country it can be as high as $70,000 per year.
The possibility of large payments for long-term care can be the greatest financial threat faced by individuals and couples in their retirement years. That’s why purchasing a long-term health care policy is an option recommended by many financial advisors and insurance specialists as a way to protect assets.
Robert A. Dienelt, an investment representative with Edward Jones, Long Beach, says one in four people at some point will need long-term care.
“When it comes to needing long-term care, many people respond, ‘It won’t happen to me!’” Dienelt said. “We want to protect our customers’ hard-earned savings against unexpected risks. Long-term care insurance is an affordable way to protect your savings from the financial burden of a long-term illness or nursing home stay.
“From an investment representative’s perspective, we spend most of our careers working with people to increase their portfolio value. And something like a long-term care stay can quickly wipe it out. That’s why we like to make people aware of long-term care health insurance.”
The key with long-term care is don’t wait until it is too late. The older you are, the higher the premiums are going to be. Dienelt says another problem with waiting too long is that certain pre-existing ailments will disqualify you from getting long-term care insurance.
You also don’t want to start too young. Even though the policies will cost less the younger you are, you don’t want to pay for decades before the care is likely to be needed. Dienelt said their target age for bringing the issue up with customers is age 55 and up.
There are also income considerations. Lower income people aren’t going to be able to afford a long-term care policy, and those individuals will have to resort to Medicaid.
Long-term care insurance is particularly important to safeguard the savings of a couple. One spouse’s illness can wipe out the savings of the other spouse, even though the spouse is allowed to keep some assets such as a home and some savings if their spouse is placed in a nursing home on Medicaid, which provides health care for impoverished individuals.
Dienelt said most couples seem to assume that they will live the same amount of time, but that doesn’t usually happen. In order to qualify for Medicaid nursing home reimbursements, someone who isn’t married can keep even less assets than a married person: a home, furnishings, clothing, jewelry and money for burial expenses.
Betty Lou Reeves, vice president of Smith, Turner & Reeves CPA, Jackson, said the long-term care options available are confusing at best.
“The way to approach it is to talk to a reputable insurance agent who may represent several companies, someone who can discuss the various options, waiting periods and amounts of coverage that are available,” Reeves said. “I would also recommend the National Association of Insurance Commissioners pamphlet on this issue that is available to the public through Commissioner of Insurance George Dale’s office. It is worth any prospective purchaser to take the time to read it to educate themselves about various types of coverage available prior to talking to an insurance agent about purchasing the coverage.”
Reeves said some people think Medicaid is a safety net, but says that isn’t a good way to plan for long-term care if you have built up good assets.
“If you don’t have anything, the Medicaid process is easy,” Reeves said. “There are legitimate ways to plan for long-term care, and Medicaid is not the way to go for people who have the means to do otherwise.”
Reeves also voiced concerns about current budget shortfalls in the Department of Medicaid in Mississippi, which is currently facing a serious deficit of funds. Reeves said it is a very troubling situation considering that a lot of people who have no resources are depending on Medicaid.
Another government aid program, Medicare, doesn’t pay for long-term care such as a nursing home. It might pay for the cost of skilled nursing care and therapy in a facility that is approved for that type of care that might also be a nursing home, but only for a limited period not to exceed 90 days and then only as long as the care is required.
“The big difference is custodial care versus medical care,” Reeves said. “Medicaid will pay the cost of custodial care for the needy, but the limits of income and resources exclude many people from being able to obtain those kinds of benefits. Medicaid is basically a welfare-type program, and by using Medicaid some choices are eliminated. For example, if your parent qualified for Medicaid and you wanted to put your parent in a nursing home close to home, instead they might be sent to a nursing home somewhere else in the state. However, the nursing home legislation enacted provides that nursing home care is supposed to be of the same level whether Medicaid or private pay.”
Reeves said assisted living facilities are taking the place of nursing homes for many people. In these facilities the elderly can enjoy community activities, and have help with meals and housekeeping. But the cost is much lower than in a nursing home. Assisted living accommodations start at about $20 per day in Mississippi, compared to average nursing home care of $30 per day and up.
Contact MBJ staff writer Becky Gillette at firstname.lastname@example.org or (228) 872-3457.