Long-term health care will be a term that Americans will become very familiar with in the coming years. By 2050, one-fifth of the total U.S. population will be aged 65+ — equivalent to 88 million. According to Dr. Richard Hodes, the director of U.S. National Institute of Aging, people are “living longer, but that doesn’t mean they are living healthier.” The congressional budget offices estimates that 2/3 of people over 65 will need care assistance to deal with loss in functioning at some point during their remaining year of life. That means roughly 58 million people will require care assistance by 2050.
While many Americans are focused on growing their retirement fund, they forget to consider the potential costs of long-term care. According to a report from 2012, the median annual rate for nursing-home care in the U.S. was $73,000 and the average annual base rate for residence in an assisted-living facility was $41,000. The median annual rate has steadily increased since 2011, and it isn’t predicted to decrease in the future.
Medicare & Long-Term Health Care
Clearly, long-term health care is not something that should be ignored, especially when you take a look at the significant costs. Many adults are under the impression that Medicare will cover long term health plans, which is not always the case. According to Medicare’s website, “Medicare doesn’t cover long-term care (custodial care that includes daily activities like eating and bathing), if that’s the only care you need. Most nursing home care is considered custodial care.” That means, unless there is a medical necessity for care, Medicare doesn’t cover it.
Long-Term Care Insurance – Is it right for you?
For adults, the average annual premium for a long-term care policy purchased by a person aged 55 or younger was $1,831. For the same policy purchased by an individual aged 70-74, the average premium is $3,421. In essence, the younger and healthier you are when you buy the policy, the cheaper and better it will be.
Unfortunately, the question of whether you should buy a long-term care insurance plan is not a “one-size fits all” answer. For example, the very rich probably can afford to self-insure, however, the poor can’t afford it and will be forced to rely on Medicaid. If you fall in the middle of those categories, discussing your plan with a financial advisor would be a smart step to deciding.
A financial advisor can help you decide how all your investments will work together as a whole, including your retirement fund and long-term care policy. Today, “hybrid policies” are becoming increasingly popular, as they allow more flexibility in policies. Some hybrid plans include:
-A mix of long-term care insurance with life insurance, where premiums won’t rise
-Annuities with long-term care riders
-Short-term care policies
-Shared-benefits policies for couples
Discussing Your Individual Needs
If you are considering purchasing a long-term care policy for you or your loved ones, the first step is to discuss your options. At Vital Life, we represent a variety of top-tier companies that offer customizable policies depending on your needs. We can help assess what is necessary for your plan and if a plan is necessary at all. Considering the cost benefits to buying while you are young and healthy, it’s never too early to start the conversation.