Solving the Costly Future of Nursing Care by YourselfSubmitted by Bradford Financial Center on November 24th, 2018
Costly doesn’t even begin to describe what the forecast of the nursing home and home care industry is projected to look like. Genworth Financial isn’t painting any prettier of a picture, either. Their Cost of Care study reports an outlook that nursing home care is growing at a more rapid rate than in-home care, but the trajectory for both are eye-openers.
State of Care Costs
Nursing Home Care
The current nationwide median cost of a private room in a nursing home is $206 per day, which adds up to more than $75,000 per year. And the median cost of care from a licensed home health aide is $19 per hour, which equals $152 per day for eight hours of care (more than $55,000 a year).
Home-care costs haven’t risen as quickly, in part because they’re tied to labor rates rather than health-care inflation rates. But they still increased by 2.7% over the past year and 1.7% per year over the past five years. If home-care costs rise by 3% per year, then the price tag could be more than $100,000 annually to receive home care for eight hours per day in 20 years and about $135,000 in 30 years.
Covering the Costs
A long-term-care insurance policy may help you cover a much larger portion of potential costs. Other products have dual purposes like an annuity in combination with a long-term care policy and life insurance. Long-term care policy purchases are on the rise, but annuities with LTC riders are increasing as well.
Annuities. A lot of annuities have withdrawal penalties for up to a set number of year (7 10 or 15 years) Some annuities have a nursing home rider. When faced with a permanent stay in a nursing home, a Medicaid Compliant Annuity (MCA) – structured correctly contains special contract provisions if used appropriately can protect assets and accelerate Medicaid eligibility, providing financial relief in the face of crippling nursing home care costs. Learn more about annuities.
Life Insurance. Using life insurance products as a way to pay for nursing or assisted care is available on some policies as a long-term care rider or accelerated death benefits. For example, if your policy was $1,000,000 you could accelerate 75% of the death benefit to use for nursing home care. When you pass away your beneficiaries will receive the remainder. However, if you do not need long-term care, when you pass away your beneficiaries will receive the death benefit.
Long-term Care Insurance. As a traditional product the benefits would pay a per day benefit, depending on the policy, and typically only pays for 2 years, depending on the insurance policy. Some policies you can pay for a return of premium rider. However, this long-term care insurance can be thought of like car insurance, if you buy the insurance and have a need (or accident with your car) you receive benefits, but if you don’t use it then you have just paid in premiums for nothing.
Note: Every individual need is unique; please seek the consultation of an experienced advisor to find the solution that is right for your individual needs.