Long Term Care: What's the risk?

Long term care is a topic on the front of a growing number of Americans.  You may be thinking about your own future and livelihood or about an aging parent when you think of long term care, but chances are that we can all name someone who has needed custodial care of some sort for 90 days or more.

For me, it was my grandfather developing Shy-Drager syndrome over several years.  A friend of our family's was a retired nurse and fortunately lived across the street from their North Carolina home.  Had it not been for her, I'm not sure my grandmother could handle the situation by herself.  After both my grandparents passed, I am grateful that I finally had the opportunity to thank them for all their help.

The cost of care can be staggering.  In 2006, the News & Observer reported that the average cost of long term care (http://www.newsobserver.com/690/story/479391.html) in the Raleigh – Durham area is $62,780 a year.  But the cost of health care continues to trend upwards.  Unskilled home health care starts around $15 an hour, and if you require a nurse at home, it can easily be twice that amount.

In fact, according to the US General Accounting Office, in 2004, Americans spent $193 billion on long term care (http://www.gao.gov/new.items/d06401.pdf).  The government is so aware of the future problem that long term care poses to our society, congress passed a measure making sure that its members had access to long term care (http://thomas.loc.gov/cgi-bin/bdquery/z?d106:HR04040:%7CTOM:/bss/d106query.html%7C).  Does this mean that every citizen has access to the government plan?  No.  So what options are left for the rest of us?

What are my options?

• Pay for it out of your own pocket.  This may sound like the worst option of all, but the truth is that most Americans who are faced with a long term care crisis use this option first.  Consider how needing long term care will impact your retirement savings.  Consider if you need to pay for this expense out of pocket and are married, what impact that would have on your spouse.  Although this is a very common answer, it rarely seems the most attractive.

• Have your family pay for your care.  It is said that long term care is not a health care issue, it's a family issue.  Because of that, some families decide that it is best to have someone from the younger generation take care of the older generation, for as long as they can.  They may also decide to help pitch in with the cost if the family is geographically separated or unable to help due to time constraints.  If you think this may be the route for you, it is imperative that you have that talk with your family now rather than making assumptions.  Planning ahead with your family is better than waiting until your health fails.

• Rely on Medicaid.  Probably the last option most people would choose is to let the government control their care.  I must say, for those with no other means, I'm glad that we do have programs like Medicaid.  This requires having a low income, very few assets, and giving control of your health care to the government.  The specific requirements for Medicaid change periodically.  For more information, visit the North Carolina Department of Health and Human Services (http://www.dhhs.state.nc.us/dma/).

• Offset the risk with an insurance policy.  You and your family may choose to displace the risk, in full or in part, with an insurance policy.  In exchange for a specified premium, this strategy forces the insurance company to pay a specified amount for your care. Many financial planners prefer this to paying for the costs out of pocket partly because it is more predictable.  This keeps a couple from using all their retirement assets for long term care and leaving nothing behind for the other spouse to live on. 

Working with someone who has a strong background in long term care may be your best option to help you sort through the confusing options you are faced with.  They should be able to describe how different scenarios will effect you.  What ever option you and your family choose, it is important to approach the topic with openness and care.