How To Protect Your Savings From The Nursing Home

Over the past several years, a shift has taken place in our society. The baby boomer generation, those born between 1946 and 1964, have always led the way in terms of products and services offered by companies because they account for such as large segment of our population.

Now, as this tremendous group enters their mid-60’s, they are creating the need for another commodity – that of long-term care.

The Need for Long-Term Care

It’s no secret that people are living longer today. Due to great advances in medical technology, many of us are living well past normal retirement age, and the prospect of living 20 or more years beyond retiring is a reality.

While this allows a longer term of “golden years,” not everyone in this category is living those years in perfect health. In fact, in many cases, it is quite the contrary. And, while many of these individuals may not be bed ridden, they do often need assistance with basic daily activities, such as bathing and getting dressed. This need for assistance could be the result of suffering a stroke or heart attack, or it could simply be a result of the aging process.

Consider these statistics:

• Approximately 43 percent of people who reach age 65 will need some form of long-term care;
• The average annual cost of a nursing home in 2010 is roughly $200 per day, which equates to over $70,000 per year;
• The average need for nursing home care is 2 ½ years.

With these figures in mind, it is important to earmark a portion of savings for a potential long-term care need. Many people, however, believe that “it will not happen to them,” and therefore do not allocate the necessary dollars or prepare financially for future care expenses. Part of the reason for this is that, even when people admit that they might need care in the future, they mistakenly believe that these costs will be picked up by programs such as Medicare and Medicaid. Unfortunately, this is not always the case.

Why You Shouldn’t Rely on Medicare

Nationally, the Medicare program covers less than 11 percent of all nursing home costs. This is due in part to the strict guidelines necessary to qualify for Medicare nursing home coverage. It is also due to the fact that even if one qualifies, Medicare actually picks up very little of the tab.

In order to qualify for Medicare coverage in a nursing home, you must meet all of the following criteria:

• Require daily skilled care, which as a practical matter, can only be provided in a skilled nursing facility on an inpatient basis;
• Be in the hospital for at least three consecutive days, not including the day of discharge, prior to entering a skilled nursing facility that is certified by Medicare;
• Be admitted to the skilled nursing facility for the same condition for which you were treated in the hospital;
• Generally be admitted to the nursing facility within 30 days of your discharge from the hospital; and
• Be certified by a medical professional as needing skilled nursing or skilled rehabilitation services on a daily basis.

Provided you meet the criteria and you do qualify for Medicare nursing home coverage, the benefits are paid as follows:

• All approved charges for the first 20 days are fully paid by Medicare;
• After the 20^th day through the 100^th day, you are responsible for a daily co-insurance amount. In 2010, that amount is $137.50 per day;
• If you require more than 100 days of care, you will be responsible for the entire amount of the nursing home charges, beginning with the 101^st day.

Therefore, even a Medicare-covered 100-day stay in a nursing home can still cost you $11,000 (80 days at $137.50 per day).

Why You Shouldn’t Rely on Medicaid

Many people believe that the Medicaid program will cover their long-term care expenses. While this is partially true, there are some strict guidelines you must meet in order to be covered. For example, to qualify for Medicaid, you must have income and assets below certain limits, generally putting you at the poverty level in your state. These limits vary from state to state.

In order to qualify for Medicaid skilled nursing home coverage, a single individual is typically only allowed to keep a small amount of “non-countable” assets when being determined for eligibility. These can include a primary residence (under certain conditions), a prepaid funeral (although some states limit its cost), a term life insurance policy, some personal items, and a small sum of money called a cash allowance. This cash allowance is generally under $3,000 in most states.

Each year, approximately half a million people “spend down” their assets in order to qualify for Medicaid long-term care assistance. However, over the past few years, laws have been put in place to prevent people from knowingly disposing of assets for the sole purpose of qualifying for Medicaid long-term care benefits.

What Will Pay for Care – And Not Leave You Broke?

Although Medicare and Medicaid could pay for care, the “hoops” you must jump through in order to qualify by far outweigh the simple act of planning ahead for this potential care need.

Much like protecting yourself from damage to your home or auto, there is an insurance option that can help protect your assets from the devastating cost of a long-term care need. This long-term care insurance can be designed to pay for care in a nursing home, as well as for care received in your home.

In addition to paying for all or part of your care expenses, many long-term care insurance policies can be designed so that your benefits increase over time. This helps to defray the effects of inflation and price increases on the care you receive.

Keeping Your Assets Where They Belong – With You

Although many people recoil at the thought of purchasing more insurance, the truth is that a long-term care insurance policy costing you a few hundred dollars per month in premiums, could essentially save you $200 or more per day in long-term care expenses. This coverage not only allows you the peace of mind knowing that this large expense is covered, but it also allows you keep your hard earned savings where they belong – with you.