What’s the largest unfunded liability facing baby boomers and their 
elderly parents?  It’s the cost of long-term care.

Why do you need to be concerned about paying for it?
The reason is that most people believe that Medicare will pay for this service. It does not. Medicare only pays for short-term skilled care, usually 100 days. In addition you’ll only get Medicare benefits if you go directly to from a hospital to a nursing home.

The only other way you can pay for long term care is to qualify 
for Medicaid -- a welfare program financed by the state and federal government.  Eligibility rules differ from state to state. In general, if you want to qualify for Medicaid,  you must first liquidate a large percentage of your assets to pay for your own healthcare. 

Let me answer the most common questions I get asked about long-term care insurance.

The first… what are the  chances I will need chronic care and on average how expensive will it be? Now, I don’t have a crystal ball, but Trudy Liberman of Consumer Reports states that half of all women and a third of all men who are now 65 will spend time (many of their last years) in a nursing home. The annual cost on average is $50,000 and more.  In Connecticut, for example, costs can be over $80,000 a year.

Second… in terms of income, for whom are long-term care policies best suited? The insurance industry says long-term care policies are best suited to those whose no-excludable assets, such as their homes valued in excess of $200,000, and whose income is $35,000 or more annually.

Of course everyone wants to know how expensive are long-term policies?

Premiums vary greatly from company to company. They are based on your age, the benefits you select, and the number of years you want a company to pay for the benefits. Premiums can range from a few hundred dollars a year for a bare bones policy bought by people in their 30s. In contrast, someone in their 60s could pay tens of thousands of dollars a year for an all inclusive, inflation adjusted policy.

Here’s an important question:  When should you buy a long term policy?  I bought a policy at 62. I agree with the advice Consumer Reports gives. Buy a policy between 55 and 65 only if you have a medical condition, such as diabetes, that could  become worse over time. However, by the age of 60, you should seriously consider whether you need this kind of coverage. The later you buy, the more expensive the policy.

The state of your health is also important. Some companies will accept health conditions that others won’t. You need to shop around.

 The bottom line is that  long term care insurance is one of the most complex  and costly  insurance products on the market. It’s an insurance jungle out there, and you need to know the right questions to ask.

A few of them are:
Can the premium go up?
Does the policy exclude existing conditions?
When do benefits begin?
Is there an inflation rider?
Is the policy automatically renewable?

To learn more, I’m happy to say free health insurance counseling is available. Call your local area agency on aging, or call the ElderCare Locator toll free number: 1-800-677-1116. 

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