Important Information for You on Long Term Care

In many countries it is common for older people to spend their final years living with their children. The children take care of them and help with any medical problems they have.

That was even true here in America up to the 1950’s and 1960’s. Grandma or Grandpa lived with one of their children who took care of them.

Until about 60 years ago nursing homes did not have a good reputation. Many older people never would consider going into one.

The Major Changes in This Country Since Then

The quality of nursing homes has improved. No longer is there a stigma attached to most of them. Senior Centers and Assisted Living Facilities have opened. There are even special communities for those 55 and older.

Most older people today don’t want to impose on their children. They prefer not to have their children care for them. Many see an advantage to living in a 55 and older community. Many like the services and amenities offered by a Senior Center. They also would be willing to move into an Assisted Living Center or Nursing Home.

The Problem that Has Developed

The cost of staying in a senior center, assisted living center or nursing home has continued to rise.

• Here in Tennessee the cost for a semiprivate room in a Nursing Home is over $66,000 annually and for a private room is over $73,300 annually.
• The cost to live in an Assisted Living Center is almost $46,000 annually.
• The cost to live in a senior center is almost $32,500.

When they were in their late 30’s and 40’s, the older people today realized these may be too expensive for them.  So, they looked for ways to cover all or part of the cost if they needed to move into one of these facilities.

Long Term Care Plans

In the 1980’s and 1990’s, insurance companies stepped up and started offering Long Term Care plans. These plans provided payments for the cost of certain types of care for people who needed it at home or in a Senior Center, Assisted Living Center or Nursing Home. Many people signed up for these plans.

One major problem has developed.  Most insurance companies did not accurately forecast what was going to happen when they set the monthly premiums on these policies.

• They knew health care costs were going to increase. However, they didn’t anticipate they would rise as much as they have year after year.
• They predicted about 5% of the people who took out these policies would drop them without ever using them. Less than 1% of the people with this coverage have been letting it lapse.
• The financial crisis of 2008 and 2009 led to a drop in interest rates to almost nothing. The insurance companies did not get the interest on the premiums collected on these policies they anticipated they would.
• With the advances in medicine, people are living longer. It does not mean they don’t have severe medical conditions just that they’re living longer with them. The stays in nursing homes and assisted living centers are longer than forecast.

Insurance Companies Have Been Losing Money on These Plans

Many have stopped selling new plans. All have had to increase the premiums on existing ones. This has come as a shock to those people who have them.

Premiums have gone up 50 to 90%. They may continue to increase.

• One insurance company, CNA, has increased their annual premium on some of their policies by more than 90% to over $4,800.

These premium increases place a sizable dent in what the people have to live on annually. Many people will be forced to drop their plans because they can no longer afford them. If they do, they won’t get back any of the money they paid for them over the years.

What is Going to Happen?

Let’s use as an example an older person who has to go into a nursing home.

• If that person has assets of less than $2,000, they may qualify for Tennessee Medicaid. The nursing home costs will be covered by Tennessee Medicaid.

The person can exclude certain assets form the $2,000 maximum. Some of these are pre-paid burial plans, wedding rings, one vehicle and the person’s home, if it is worth less than $560,000 and the person lives there.

• If a person has assets of more than $2,000 and these include money in savings and checking accounts, investments and the cash surrender value of life insurance policies, they will have to use these to pay the costs for the nursing home. When their assets drop below $2,000 maximum, Tennessee Medicaid would start to pay.

Here are nation-wide statistics on nursing homes to consider:

• 40% of those who reach age 65 will enter a nursing home later in their lives
• Of those admitted to a nursing home 38% will be discharged to go home or to another setting.
• The average stay in a nursing home is 835 days. That is almost 2 years and 4 months. However, there really are no average stays in nursing homes.
• 65% of those admitted die within a year.
• 10% live more than 5 years.

The same statistics for the state of Tennessee are not readily available. Most probably they are pretty similar.

If You are 65 or Older, It Might be Wise for You to Do Some Planning

The first thing is to assess your health and exercise on a regular basis. That will enable you to be healthy for a longer time.

If at some point you need assistance in living, decide whether you want to receive that at home or an assisted living center. Normally it would be cheaper at home. It also would not hurt to look at nursing homes and pick one where you would want to stay if that becomes necessary.

Find out the cost and see how you can cover those costs. You may want to have your child or children help you do this research.

An Elder Care Attorney and a Financial Planner

 There are also two resources available for you here in East Tennessee – attorneys who specialize in Elder Care and Financial Advisers who can help you structure your finances. It might be to your advantage to meet with one or both.

Don’t put off looking at this and making plans. You never know when or how quickly your health may deteriorate and you may not have the time to consider your options then.