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Long-term care: an expense many Americans will face, P.2

In our previous post, we began looking at the issue of long-term-care and the difficulty many Americans have in purchasing long-term-care insurance. Here we continue that discussion.

The insurance industry has struggled to persuade many older Americans they need long-term-care insurance policies. Simply put, they are not affordable for everybody. As we noted, many insurance companies have begun selling long-term-care insurance along with traditional life insurance, as a hybrid product. Companies who do this usually sell long-term-care insurance along with universal life policies, which have an investment component and which may be paid out early to assist in paying for nursing home care.

Many consumers who are skeptical of paying for long-term-care insurance they may never use are more likely to purchase it in a combination package. Some companies have seen a dramatic increase in such hybrid policies, whereas sales of traditional long-term-care insurance dropped around 23 percent in the last five years, according to sources. Many consider that such hybrid policies offer a more cost-effective way of insurance against the possibility of extended nursing home stays than traditional long-term-care policies.

The costs of long-term-care, expensive as they are, can easily deplete one's estate, particularly where the stay is lengthy. According to sources, the median stay in a nursing home for those who end up passing away there is around five months. The median cost of a private room in a nursing home is $213 per day, or $6,500 per month, according to estimates. Assisted living facilities run around an average of $3,000 per month.

For those who have no other option than to spend down their savings and liquidate assets to pay for long-term care, there is always Medicaid, which is the largest payer of long-term-care services and accounts for roughly 42 percent of total spending, according to estimates. To qualify for Medicaid, individuals over 65 and have assets worth less than $2,000, excepting home equity of as much as $500,000. Assets transferred out of an applicant's control within five years of applying are considered in the qualification process. Medicaid will pay for stays of up to 100 days at a skilled nursing facility are paid for up to 100 days if medically necessary, following an inpatient hospital stay of three or more days.

It is important, especially for aging individuals, to consider how they will pay for long-term care expenses. The assistance of an attorney knowledgeable in such matters is indispensible.

Source: Businessweek, "Insurers Pair Long-Term Care With Life to Entice Older Buyers," Elizabeth Ody, 19 May 2011.

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