Costs and alternatives to long-term care

nurse helping an old man in his homeLong-term care is horrifyingly expensive – as The New York Times pointed out in an analysis this week, entitled "ignore Long-Term Care at Your Peril."

Long-term care insurer Genworth offers this 2010 online state-by-state calculator of the cost of long-term care. The government offered these nationwide cost of care estimates in 2009:

  • $198/day for a semi-private room in a nursing home- $72,270 per year
  • $219/day for a private room in a nursing home- $79,935 per year
  • $3,131/month for care in an Assisted Living Facility ($37,572 for a one-bedroom unit for a year)
  • $21/hour for a Home Health Aide, $61,320 for 8 hours a day for a year
  • $19/hour for a Homemaker service, $55,480 for 8 hours a day for a year

If you've never shopped, you'd probably be surprised how difficult it is to buy long-term care insurance. The plans and their costs vary widely and it's hard to understand exactly what you're buying because of the volume of small print. Before you embark on a purchase, you might want to take a look at what the U.S. government offers federal employees. The costs and policy descriptions will give you a starting point. For instance, if you are currently age 65, you can buy $219,000 or $200/day worth of coverage over three years (the average length of time most people need long-term care) with a 4% inflation protector for $263 per month or $3,156 per year.

But don't count on those premiums staying the same. A recent article in The New York Times said that long-term care insurers Met Life and John Hancock are asking state insurance regulators to let them raise the premiums on existing policies as well as new ones by 40%. Ouch!

To be fair, if you pay $3,156 per year annually until you are 95, you will only pay $94,680, which is a drop in the bucket compared to the cost of long-term care today. But if you don't think that you can pay these costs and any increases year after year, then don't buy long-term care insurance because under most policies once you stop paying the premium, the insurance will be canceled and you'll lose everything you've paid in previously.

Given all this unsettling news, what should you do if you can't afford long-term care insurance? What's your backup plan? Here are three possibilities:

Class Act. A part of the Affordable Care Act, Class Act is a voluntary program that will allow working people 18 and above to buy long-term care insurance even if they have serious healthcare issues. Enrollees must work for five years to be eligible, but the wage requirements are expected to be very low. There will be a national system set up that will be the same across the country. Premiums will be set by the government at a level that allows the program to be self-sustaining. Administrative costs are capped at 3% and participants must get at least $50 per day, indexed for inflation. Details will continue to be more available with the program rolling out in 2013.

Medicaid. Right now Medicaid rules in most states require the aged to spend down their resources until they have no more than $2,000 before qualifying for Medicaid nursing home payments. But new rules for Medicaid in the Affordable Care Act emphasize home- and community-based care.

Medicaid recipients will no longer be limited to nursing home care in any state. There also will be more emphasis on technologically based care and encouragement of public and private cooperation. In the meantime, Cash & Counseling, which is available in about 30 states and administered by Medicaid, gives seniors who qualify money to pay family members or others to provide care. The amount is based on the older person's financial situation and the cost of home care in the region. In general, the financial guidelines are more generous than the limited levels for people seeking nursing home care. To check availability in your state, contact the U.S. Department of Human Services' Eldercare Locatoronline or by phone at (800)677-1116. Ask them about direct payment programs for in-home care. Or turn to for online guidance.

Veteran's Administration. Through the Aid and Attendance program, the Department of Veterans Affairs pays between $1,056 and $1,949 per month for home-based care or care in a facility for single vets, married veterans and their spouses, and surviving spouses. Vets who can qualify for a Veteran's Administration mortgage can potentially qualify for this long-running but little-known program. There are income limits. To qualify, a couple's income can't be higher than $23,396 and a single vet can't make more than $19,736. The income limit for a widow or widower is $12,681. Veterans whose annual earnings exceed that amount may still qualify if their income falls to that level after deducting un-reimbursed medical expenses, including the cost of assisted living, home health care, prescription drugs or insurance premiums. In general, the veteran can't have more than $80,000 in liquid assets, not including a home or personal car. State Veterans Affairs offices can provide further information and help with qualifying.

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