The high cost of long term care is rarely planned for
While planning for retirement, few people plan for the potential need for nursing home care.
The cost of long term care has become one of the largest expenses faced during retirement. At the same time, only a small minority of people actually plan for this eventual need. By the time a person reaches the age of 65, their chances of needing a nursing home at some point are about 50-50 at the moment.
These types of annual cost are very high and most people haven’t factored it into their savings.
The average cost of long term care in a private room at a nursing home averages at $75,000 per year. The average length of a stay in a nursing home is just about 2 and a half years. Clearly, that expense rapidly adds up as it comes with an average of $185,000. Among the reasons people simply don’t create a financial plan for it is that many people think it isn’t expense they’ll need to pay. It is a common belief that Medicare will cover the majority of the cost of nursing homes, doctor visits and hospital visits.
However, Medicare does not cover many different types of cost of long term care such as “custodial care.”
The type of care that assists people with their day to day tasks such as grooming, bathing, dressing, meal preparation and eating are not covered by Medicare. These personal care services must typically be paid out of pocket or by long term care insurance policies. Unfortunately, many people also hesitate to pay for those insurance plans because their premiums are quite high. Those insurance premiums are frequently seen as prohibitively expensive, so people take the risk.
The forms of long term care expenses that are covered by Medicare including certain forms of rehabilitative care and skilled nursing care. Moreover, these are often covered only if it is ordered by a doctor following a hospital stay of a minimum of three days. In those situations, Medicare would cover the complete cost of care for the first 20 days. After that, the next 80 days are partially covered. Following this period of 100 days, Medicare no longer covers those care costs, either.
The most common options to cover the cost of long term care include self-insuring if you are financially able through personal investments, life savings and even home equity or private long term care insurance with high premiums. While Medicaid does have some additional potential benefits, it’s important to understand them completely as they may not be as appealing as they sound. In fact, they may even involve Medicaid seeing reimbursement for the expenses from a person’s estate after they have died.