By: EDMOND JACOBY - Staff Writer NORTH COUNTY ---- Life expectancy in the United States ---- 77.2 years, according to the National Center for Health Statistics ---- is nearly double today what it was a century ago. But as America's baby-boom generation, the population bubble that was born between 1946 and 1964, approaches retirement, it comes face to face with a hard reality: Its income years are likely to end long before its spending years.
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That simple fact begs the question: How does one provide for the possibility that advancing age will lead to very costly care needs, even as the ability to pay for that care slips away?
"If you only have $40,000 in savings, that would be depleted in less than a year of nursing care, and you would qualify for Medi-Cal," said Enid Kassner, a senior policy analyst for AARP. "But if you have $150,000 or $200,000, you should look at insurance."
Kassner was talking about long-term care insurance, a specialty product designed to insulate someone from some or most of the financial burden of getting on in years. Insurance against a long life ---- that's what it amounts to ---- is not the only way to plan for the future, however.
A common misconception about long-term care is that it takes place in a nursing home. While patients in nursing homes do receive long-term care, so can people who continue to live in their own homes and people who live in a variety of alternative residential arrangements.
Another common misconception is that only the elderly need long-term care. Actually, the California Department of Insurance says only about half of all persons receiving long-term care are elderly. But it is the people who do not need it until they age who have an opportunity to buy insurance to help pay for it.
Long-term care, as defined by the department, is the assistance or supervision someone may need when he or she cannot manage the basic activities of daily living, which may include bathing, dressing, preparing food, moving about or leaving home.
People sometimes are unable to do these things because of injury or illness, frailty, or because they have suffered a stroke.
Some people also lose the ability to do for themselves because of cognitive impairment, the long-term mental deterioration typical of Alzheimer's disease and other brain disorders.
It is an oddity of long-term care that it may be needed only for a short period of time. That might be the case, for example, during the period of recovery from a surgical procedure or a broken bone.
It also may not be limited to personal care, but may include homemaker services for someone who cannot clean a home or wash laundry or dishes.
The question of who pays for the long-term care these conditions often require has a simple answer: If you need care, you pay for it.
That care can be expensive. According to the National Center for Policy Analysis, a nonpartisan Dallas-based public policy advocacy organization, more than half of all people who enter nursing homes spend between $65,700 and $328,500 per year.
That poses a problem because in California the average total personal income of people over age 65 is about $28,000, according to information available on the Web site of the California Department of Health Services. Men over 65 earn an average of $32,300 and women earn $23,900, it states.
Many retired Californians count on the accumulated value of their homes to provide a financial cushion in the event that they need long-term care, either in a nursing home setting or even at home, where they can be cared for by visiting caregivers. And they count on Medicare and Medi-Cal to pay their bills.
Still others cash-out their home equity and buy into continuing care residential communities, or CCRCs.
Carlsbad-by-the-Sea is such a community, a not-for-profit corporation that provides a range of living options for seniors. Independent living, with one-, two- or three-bedroom apartments, coupled with activity programs, restaurant-style meal plans and on-site medical options, cost hundreds of thousands of dollars and require monthly fees of as much as $4,000. But the continuing care contract provides for continuing residence, and even care in assisted living plans or nursing facilities, even if the residents outlive their assets, according to Carlsbad-by-the-Sea Executive Director Dawn Larsen.
People have different reasons for wanting to buy into a place like Carlsbad-by-the-sea, For Jim Sharp, 77, and his wife Kay, 78, it was easy: "We didn't have children," she said.
"We couldn't rely on them because we didn't have any, so we moved here from Chicago and bought here," said her husband. "Kay's mother was in a CCRC in Illinois and we liked what we saw there."
"We were bent in this direction after having taken care of two very dear friends and seeing what they went through," said neighbor Jim Espy, 80.
"We were very active in the Lutheran Church in Yorba Linda, where we lived," said his wife, Mildred, 79. "We retired from jobs that required a lot of work, but then we found that retirement required a lot of work, too," said the former telephone company employee.
For 88-year-old Nancy Smith, the issue was peace of mind.
"I had been a widow for 15 years," she said. "When this place was rebuilt, I moved here because I have a lifelong love of the ocean."
Should any of them need medical care that drains their assets, Carlsbad-by-the-Sea will accept what Medicaid and Medicare pay as sufficient because of their continuing care contracts.
The rules covering Medicare and Medicaid differ greatly. Medicare is the federal health insurance for the elderly established in 1965 within the Social Security Administration. Medicaid, created at the same time, is a federally mandated state program that acts as a safety net for people who need medical care and cannot afford it. In California, the Medicaid program is called Medi-Cal.
The trouble is, Medicare will pay for no more than 100 days of medical care, and it pays for only medical care, hospitalization and pharmaceuticals. Medi-Cal is available only to people who meet an assets test: the value of a person's home and one car don't count, but beyond that the assets limit is $2,000 for an individual or $3,000 for a couple, and long-term savings, such as an individual retirement account, is a disqualifier.
One option for making sure the money is there to pay for care is long-term care insurance.
"It's not for everyone," said AARP's Kassner.
"It's really only for those who can afford to pay the premiums," she said. "It should be considered as part of a comprehensive financial plan for old age."
Kassner said that evaluating the assets available to carry the burden of care is important.
The kind of coverage provided varies, but it broadly falls into one of two general categories ---- minimal and generous.
Minimal coverage policies typically provide payments for the cost of admission to a care facility up to $50 per day. The benefits are limited to a maximum duration, typically two years, with no benefits for the first 90 days and with no adjustment for inflation.
A generous coverage policy includes integrated home care, a higher daily limit, with $140 typical, but higher limits are available. The benefit duration of such a policy will be much longer and may be unlimited. An initial no-benefits period of 90 days may apply, but over time the benefits are adjusted for inflation.
The inflation adjustment can be important for a policy purchased at age 60 that is not used until age 75. At an annual rate of 5 percent, inflation will double the cost of care every 14 years.
Premiums for long-term care insurance aren't cheap. For someone 85 years of age, the premiums for generous coverage can be as high as $12,000 per year, although experts say it is unlikely that someone that age would need that much insurance.
"Most people don't buy long-term care insurance until they are in their early 60s, and they won't need it until they reach their mid-80s," said Kassner. "That means they may be paying premiums for 25 years or longer."
Someone in his or her early 60s should expect to pay about $2,600 per year in premiums for generous coverage, according to Clay Cotton, who operates a long-term care insurance clearinghouse on the Internet under the name Long Term Care Insurance Buyers Advocate. Over 25 years, that would amount to $65,000, or about the expected minimum for nursing home care for one year.
"The late 50s, before you turn 60, is the time to buy long-term care insurance," said Denise Nelesen, a licensed clinical social worker and a spokeswoman for the San Diego County Aging and Independence Services.
"If you have a family history of stroke or early Alzheimer's or something, maybe you should look into it," she said.
"Long-term care is a stretch of everything you can imagine," Nelesen said. "The real key is to think about these things, to talk about them with your family. Nothing is worse than when something happens to a parent or spouse and suddenly they can no longer tell you what they would like you to do."
To soften the blow for people who buy long-term care insurance, the Health Insurance Portability and Accountability Act, passed in 1997, gave people who itemize medical expenses on their federal tax return the option to deduct their tax-qualified long-term care insurance premiums up to specific limits set for various age groups. The 2005 limit is $270 for someone 40 or younger, but $3,400 for a taxpayer aged 71 or older. In addition, benefit payments from tax-qualified long-term care policies are not taxable.
California is one of just four states ---- the others are Connecticut, Indiana and New York ---- with a Partnership for Long Term Care program, which links a number of private insurance companies and their products to a set of requirements set by the state. All so-called partnership policies are tax qualified for federal tax purposes.
Long-term care insurance, however, is only one of the strategies for ensuring that the resources are available to meet the needs of aging. For some retirees, an alternative may be the continuing care retirement community ---- but that's a subject for another day.
Source: North County Times
For more information on Long Term Care contact your Medicoverage Agent at 888 285 MEDI (6334)
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