Long-term Anxiety

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Senior citizens in the United States, unlike most younger Americans, have many of their basic needs paid for by the federal government. Social Security provides a meager but steady source of income, while Medicare covers most necessary health care at minimal out-of-pocket expense (especially if combined with private “Medigap” supplementary insurance). It may be tempting to think that once you’ve reached the age of 65, your health-related financial worries are over. But this is far from true for many Americans, in large part because of one major expense for which most people are unprepared: the cost of long-term care.

According to an article published earlier this year in US News & World Report, the average yearly cost of a private room in a nursing care facility in 2012 was $90,520. A semiprivate room wasn’t exactly a steal, either, costing an average of $81,030. When you consider that the average nursing home stay is 835 days — that’s two years, three months — and that the median annual income of seniors is $35,107, it’s obvious that most seniors just can’t pay that kind of money.


But as a survey released last week makes clear, most seniors aren’t adequately insured against these enormous expenses. An article on the survey — published by HealthDay, which also commissioned the survey — showed that 68% of Americans are worried about how they’ll pay for long-term care for themselves or a family member. Fully 87% of respondents categorized the problem of paying for long-term care as “serious” or “very serious,” a level of concern reflected by the fact that the number of Americans receiving long-term care is set to double in the next 20 years as the population ages, from 12 million to 24 million care recipients. Amid this high level of concern, however, only about 8% of adults in the United States have purchased long-term care insurance, which can be relatively affordable if a policy is bought before the enrollee experiences any major medical events.

So who ends up paying for long-term care, since most people can’t afford it and don’t have insurance that covers it? To the surprise of many — only 19% of respondents in the HealthDay survey knew this — most long-term care in the United States is paid for by Medicaid, the joint federal–state health insurance program for the needy. (Medicare only covers nursing care as rehabilitation following a hospital stay, and only for up to 100 days.)

But many people receiving long-term care under Medicaid weren’t poor before they needed this care. In order to qualify for long-term care under Medicaid, a person’s monetary assets, not including his or her home, must be less than $2,000. Many people who require long-term care have significant savings, but exhaust their savings paying for care before Medicaid kicks in. Furthermore, if someone dies while receiving long-term care under Medicaid, his or her home pay be possessed by the state government upon death to pay for the cost of care retroactively. Any assets transferred to relatives in the five years before applying for Medicaid are required to be used to pay for care out-of-pocket before Medicaid kicks in.

Do you have a plan for long-term care, other than Medicaid if you exhaust your savings? If you don’t have private long-term care insurance, what’s the main barrier? Would a tax credit for private long-term care insurance — an idea supported by members of Congress from both parties — make you more likely to buy this insurance? Or do you believe that Medicare should cover long-term care, and pay for this extra service by either raising taxes or deducting a higher premium from beneficiaries’ Social Security checks? Leave a comment below!

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