With escalating medical costs and uncertainty over health care, one burgeoning sector that is factoring heavily into the equation is long term care. As the median age in the U.S. edges further and further upward in pace with the aging Baby Boomer generation, so do medical costs and outside care needs.
It is a known fact that most of us will need long term care at one point in our life. While the common perception of long term care is that it is only for seniors and takes place in nursing homes, there are in fact many other circumstances where it would be needed such as injury and short term disability.
This assistance by family and friends help defray the significant costs that can be associated with long term care services provided by an outside party. The U.S. Department of Health and Human Services estimates that 80 percent of seniors that require care live at home or in a community setting. The average yearly cost of in home care by a health care provider is $28,000. According to a study by the U.S. General Accounting Office in 2001, the national average yearly cost for a nursing home stay is $55,000 and is expected to increase by 5 percent each year. The estimated cost for a semi-private room in the year 2032 as the last wave of Baby Boomers hit 70 is $190,600.
This is a mountain of a cost, one which few families have the resources to cover. As Medicare and Medicaid currently only cover a fraction of the long term care needs, there are two options: long term care insurance and family care. In fact, some estimates of the yearly monetary value of the informal care by family members would be worth as much as $300 billion.
In an ideal situation, an individual would have a family member available to assist them with their needs. However, even in intact nuclear families, an adult child is not always able to take on the care of the parent, whether due to finances, job demands, or the care of their own children. Also, many senior adults do not want to burden their children with their needs.
A more realistic scenario is to plan to balance the almost certain need for long term care with a mix of personal savings, family assistance and care, and a long term care insurance plan.
The long term care (LTC) insurance policies have evolved over the past decade. There is much more flexibility in the terms of when the benefits become available as well as the daily and life time benefits. Some policies also offer a family plan where the beneficiary can be designated between the couple as no one has a crystal ball to tell who will need the care first.
When creating your financial and estate plan, consider your long term care needs. A well thought out plan can help minimize the stress, both financial and emotional, on both you and your family members as well as protect against the financial drain a long stay in a nursing home would incur.