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Long-Term Care

Understanding and Managing the Costs of Long-Term Care

by Nina Silberstein

Here's the cold, hard truth: Long-term care costs in the U.S. are rising.

According to the 2006 MetLife Market Survey of Assisted Living Costs, the private pay rate for an individual at an assisted living facility averages $2,968 per month ($35,616 annually). And according to the 2006 MetLife Market Survey of Nursing Home & Home Care Costs, the average daily rate for a private room in a nursing home is $206 ($75,190 annually); for a semi-private room, $183 ($66,795 annually).

Here's a more palatable truth: Knowing about the costs, services available, and how you'll pay for it all can increase the long-term care options of you or a loved one in the long run.

Breaking it down

"Medicare doesn't pay for long-term care; Medicaid does," explains David Bendix, CPA/PFS, CFP, CFS, RFC, president of Bendix Financial in Garden City, NY. "But to qualify for Medicaid, you really have to become destitute. You have to deplete your assets, or 'spend down.'"

Bendix outlines three long-term care financing options: "Either pay for care yourself, out of your own pocket; become destitute by spending down to where you don't have any money, and then say to the government, 'Now I'm eligible, pay for my long-term care'; or purchase a long-term care insurance policy while you're young," Bendix says. The last option is probably the best, he notes, and the insurance premiums will be more reasonable when you're young and in good health.

Creating a plan

Debra J. Caruso of DJC Communications in New York, NY, recommends using a worksheet to estimate the monthly cost of needed services, which may include: entrance and/or initial assessment fee; selected unit and basic service package; meals; housekeeping; personal laundry service; linen service; medication management or assistance; personal care assistance (bathing, dressing, eating, etc.); recreational field trips; transportation; telephone service; cable TV; and beauty shop services.

"It's important to ask what services a facility offers and if there are additional costs involved," she stresses. Physician visits cost extra; personal items such as TVs, phones, and incontinence supplies may cost extra as well.

Caruso offers a series of key questions to ask in your long-term care financial planning: "What does the basic monthly cost cover? (Get it in writing.) Is there a written schedule of fees for extra services? (Request a copy.) Under what circumstances might the fees change? How much notice is given if there is a fee increase? Is there a security deposit? What is the refund policy? Can service agreements and/or contracts be amended or modified?" These are all questions to consider before committing to a long-term care facility, advises Caruso.

Exploring your options

Assisted living must be paid for out-of-pocket, unlike nursing home care. Comprehensive long-term care insurance may cover cost associated with room and board for assisted living, but be sure to check with your insurance company to review your policy.

"A number of states provide Medicaid waivers for assisted living. Waivers are designed to bypass certain regulations for care reimbursable by Medicaid in order to provide services for long-term care that would allow someone to remain in the community," reports "Since You Care: Choosing An Assisted Living Facility," a MetLife guide produced in cooperation with the National Alliance for Caregiving.

When considering a nursing home stay, there are various financial assistance avenues to research: Medicare (federal health insurance program for those 65 and older as well as younger people with disabilities); Medicaid (state and federal program that subsidizes most nursing home costs for those with limited incomes or who have spent down their assets); long-term care insurance (private pay insurance); veterans' benefits and private funding, or out-of-pocket payment (personal financing, estate planning and management).

Other senior living options include Continuing Care Retirement Communities, Adult Day Services, and Home Health Care; funding sources vary widely for these services. Accelerated Death Benefits (cash advance or percentage of proceeds of death benefit), annuities (regular payments over a specified period of time), trusts (transferring assets), life settlements (raising cash by selling your policy), and reverse mortgages (tapping into the equity in your home) are additional sources to explore.

State Health Insurance Assistance Programs, a group of programs administered by individual states and funded by the Center for Medicare & Medicaid Services, are designed to answer questions about paying for long-term care and programs available to help pay for care. These programs, known in some states as Statewide Health Insurance Benefits Advisors, Health Insurance & Benefits Assistance Corporation, or Medicare Medicaid Assistance Programs, provide education, outreach, counseling, and information to Medicare beneficiaries, their families, and caregivers.

Ultimately, it's up to you to decide which living arrangement will best suit you or a loved one. Prices vary according to the type(s) of services needed, how often and for how long it is required, and the part of the country in which the services are based.

"Each person has to figure out the best route to go, based on their own health condition, assets, and income," Bendix concludes.

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