Planning Ahead: Understanding the True Cost of Long-Term Care

Do you know the true cost of long-term care?

Chances are, like most consumers, the financial impact of long-term care can come as a shock when the situation presents itself. And according to the National Clearinghouse for Long Term Care Information, there’s a 70 percent chance that you (or another family member) will be faced with that scenario sometime after age 65.

But according to the Genworth study, Beyond Dollars: The True Impact of Long Term Caring, almost half of care recipients had not considered the possibility of needing long-term care—an outcome that can be caused by a prolonged physical illness, disability or severe cognitive impairment.

When that occurs, the paid assistance options (and their national median costs according to the Genworth 2012 Cost of Care Survey) include:

  • Licensed homemaker services ($18/hour)
  • Licensed home health aide services ($19/hour)
  • Adult day health care ($61/hour)
  • Assisted living facility ($3,300/month)
  • Nursing home ($200-$222/day)

And if you believe that the full cost will be covered by Medicare or Medicaid, understand that the former covers only short-term skilled nursing home care, while the latter only applies if you meet specific poverty guidelines.

Unpaid Caregiving
Family members often step up to the plate, with 87% providing care for an immediate family member, while 37% of care recipients were moved into a family member’s home for a period of time, according to the Beyond Dollars study. But even family caregiving comes with a price—both dollar costs since, even with insurance, there are out-of-pocket expenses and also “hidden costs” in terms of time, energy, impact on other family relationships and professional obligations.

Direct and Indirect Costs of Caregiving
According to the study, the average amount care recipients spend out-of-pocket for their own care (not including the cost of facility care) can total $14,000, with family members contributing another $8,000.

But the financial impact doesn’t stop there. Many times, the caregiver’s work life suffers, with nearly one-fifth of those surveyed reporting a direct loss of career opportunities, while 44% had to cut back on their hours, which had a detrimental effect on their income.

But caregiving isn’t just a clear-cut dollars-and-cents calculation. The impact reverberates through all aspects of the caregiver’s life, particularly concerning other family relationships. With caregivers having less time and energy to devote to their spouses and children, those relationships can experience significant stress. With 42% of caregivers reporting that the family member needing care lived with them for three years or more (24% have been caregiving for over eight years), the long-term effect can’t be denied.

What can you do now to help lessen the impact on yourself and your family down the road? Start by educating yourself about the cost of long-term care services, coverage options for long-term care and long-term care insurance here. You can also click here for a free 8-page guide to long-term care insurance from the non-profit LIFE Foundation.

Then discuss your options with your family before the need arises. Having a plan in place reduces everyone’s stress, and allows all parties involved to develop strategies to cover different scenarios.

Finally, take advantage of the information and resources provided by caregiving organizations, such as the National Family of Caregivers Association and the National Alliance for Caregiving.

  1. This subject is one that needs to be discussed at length so people are more aware of it.

    Most people overestimate the cost of a good long-term care policy. A healthy, married couple in their mid-fifties, can share a policy that starts off with over a half million in benefits for about $100 per month per spouse.

    There’s a new type of government-approved long-term care policy that can protect your assets from Medicaid even if the policy runs out of benefits.

    Here’s an explanation of how these policies work:

    http://bit.ly/How-Partnership-Policies-Protect-Assets

  2. As an Insurance Advisor with most of my clients being middle aged I have not started to talk to them about Long Term Care. This article has opened up my eyes and I will start to put a column in my news letter regarding long term care as well as on my yearly updates to make sure my clients are making plans to put LTC in place before it is to late.

    Love this site so resourceful!

    Thank Jaimee
    Kim D. Murray

  3. The National Alliance for Caregiving 2009 study revealed that 68 percent of caregivers made reductions or modifications to their work schedules as a result of their caregiving responsibilities. Cutting back in hours and sometimes leaving the workplace for extended periods can seriously impact an individual’s ability to prepare financially for retirement. One-third of caregivers reduced their working hours or exited the work force completely to care for a family member. According to a June 2011 MetLife study, the average total cost of caregiving on the female caregiver in terms of lost wages, foregone pension benefits, and reduced Social Security benefits is $324,044 in funds available for a caregiver’s retirement (MetLife Mature Market Institute 2011). Donato and Wakabayashi’s (2005) research showed that single women who care for aging parents are 2.5 times more likely to live in poverty in old age than non-caregivers. This fact is significant, given that the percentage of married women declined between 1970 and 2009 from 72 to 62 percent. In addition, 18 percent of women aged 40 to 44 (latter part of peak child-bearing years) have never had a child; that number is nearly double the 1976 rate of 10 percent (U.S. Department of Commerce, Economics and Statistics Administration 2011).

  4. The longer I have personally owned long term care insurance and the personal experience I have explaining and designing long term care plans I have these observations:

    a. Studies and statistics are not motivating people to own long term care insurance.

    b. We work to uncover need and people still do not own or are in denial to own long term care insurance.

    c. Financial writers and anyone else who writes about long term care insurance says the same thing: insurance premiums have risen, many carriers no longer offer long term care insurance, underwriting is more difficult, and there are hybrid or asset based plans with long term care riders which will provide benefits.

    I think the reason more people do now own long term care insurance are these:

    a. Denial from those who believe it will never happen to them or they will need care for a short period of time and will die
    b. Lack of sufficient income to own plans
    c. People are not looking around them and paying attention to how many people at all ages are in walkers, canes, wheel chairs, or so over weight they they are having difficulty walking.
    d. Belief that some benefit is out there which will help them and therefore why waste their money for an insurance plan when health care, medicaid, VA, will pay for their caregiving.

    Any of us could be in this situation and for a long period of time and making a plan is painful and frustrating.

    My job is to uncomplicate and explain the issues to help people make an informed decision.

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