Most people see long term care insurance as nursing home insurance when if fact it is the opposite. Long term care insurance provides options to avoid nursing home placement, unless a nursing home is where an individual prefers to live. And please do not misunderstand, nursing homes have changed significantly over time and many are now very clean and nice facilities. However, a nursing home is usually not where an individual would choose to remain for the final days or months of their life unless there are no other options.

Long term care insurance is becoming more popular as consumers realize it provides options for independence. Many studies indicate that two thirds of individuals over age 65 will require a long term care stay. A long term care stay is a nice way of saying nursing home or skilled facility stay. And over forty percent individuals over age 65 will experience a long term care stay lasting two or more years. This is a long time if you are in a facility in a shared room — not a private room, with a roommate you dislike. Think back to those college years and consider how you might like to be in a similar situation at age eighty.

And surprise, Medicare will not pay for a long term stay. Medicare usually covers days 1-20 if medically necessary and progress for rehabilitation occurs. On days 21-100 the individual pays an insurance co-pay of $128 per day (in 2008) and after 100 days, the individual is totally responsible for one hundred percent of the cost which averages between $175-220 per day (in 2008). As with anything these costs are expected to increase each year by 3-5% percent.

Long term care insurance not only will pay for these long term care stays, it will pay for care to be provided at home, which is where most individuals prefer to live as long as possible. It also pays for day care, assisted living, home modifications and other services depending on the policy.

Many individuals mistakenly think that long term care is too expensive. As opposed to what I ask you? As opposed to $6,000 per month in a long term care facility? Compare a monthly premium of $200 to the cost of $200 PER DAY in a long term care facility and tell me if long term care is too expensive?

Many are shocked when the cost of one year in a long term care facility at $75,000 eats up most of their retirement savings. Or when they have to “spend down” to qualify for public assistance called Medicaid. The government has determined that with the increasing numbers of baby boomers who will require medical care in the future that there is no possible way that the government can fund this care.

Thus the Debt Reduction Act of 2005. This Act states that individuals wishing to qualify for Medicaid assistance will need to spend all of their assets prior to qualifying for Medicaid. And there is a five year look back period to ensure that assets like homes and money were NOT given away to family members in an attempt to avoid the government receiving these funds. When money or resources are given away, the government imposes a penalty equal to the financial amount given away divided by the cost of one month in a long term care facility. So for example, if your parents gave away $60,000 today and wish to qualify for Medicaid in 2009, Medicaid will accept the application and penalize them for ten months of care. This means that they cannot receive services through Medicaid for a period of ten months from the date of their Medicaid application. Which means that if the care is truly necessary, children and other family members will pay personally for the care.

Even more reason to consider long term care insurance not only for yourself, but purchasing a policy for your parents if they cannot afford the premiums. The question is will they pay now or will you pay later for your parent’s care. Caring for parents and the emotional and financial stressors significantly impact the retirement prospects of children. Parents always assume that their children will take care of them but do not consider the impact on employment, retirement income and even marriages and children.

Don’t put yourself, your parents or your children in a situation of requiring care and not having a back up plan on paying for care. Because we will all pay for care one way or another when we are older. It’s inevitable. We will pay because of our ability to have long term care insurance that ensures we decide about our care. We will pay because our parents require care and they have not prepared financially for the cost. We will pay because we did not prepare financially for the cost by having to receive care through public assistance called Medicaid.

Unfortunately the probability that we will all die is one hundred percent absolute. The question is how do you want to spend the last years of your life? In a manner you choose or in a manner chosen for you?

pamela d.wilson, specializes in long term care planning and education for older adults. contact her at the care navigator or visit the care navigator blog for free information

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