A prolonged illness or chronic condition could end up being one of your biggest retirement expenses. Medicare pays for a maximum of 100 days of nursing home care before retirees must absorb the remaining cost themselves. However, depending on the level of assistance that you need, there are some inexpensive care options and ways to protect yourself from excessive long-term care costs. Here are a few ways to find affordable long-term care:
Compare types of care. Most Americans say they prefer to remain in their own home as long as possible. And, in many cases, continuing to live at home is also more affordable than paying for the care provided in nursing homes or assisted living facilities. A one-bedroom unit in an assisted living facility currently costs about $3,185 each month, according to a recent Genworth Financial survey of approximately 13,000 long-term care providers. Nursing homes cost even more: $185 a day for a semi-private room or $206 daily for a private room, which works out to $75,190 annually. More affordable options include licensed home health aides, who cost a median of $19 an hour and assist with personal care tasks such as bathing or dressing, and licensed homemakers, who do household chores such as cooking and cleaning for about $18 an hour. "Clearly, care at home is going to be less expensive than any type of facility-based care," says Matthew Sharpe, a senior vice president and long-term care product manager for Genworth Financial. Adult day health care, which was by far the most inexpensive long-term care option in the survey, costs a median of $60 a day. Seniors generally spend part of the day with trained caregivers and peers and the rest of the day at home.
Shop around. Long-term care pricing varies considerably by location. Prices for a semi-private room in a nursing home fluctuate between a median low of $44,165 each year in Texas and a median high of $218,453 in Alaska. "You might want to pick somewhere that the overall costs are lower," says Beth Ludden, senior vice president of long-term care product development. Expenses can also be considerably different even within the same city. Prices for a one-bedroom unit in an assisted living facility in the Atlanta-Sandy Springs-Marietta, Ga., area currently range from $900 a month to $5,525.
Solicit help from family. "Children are the first line of defense for long-term care," says Stephen Golant, a gerontologist at the University of Florida at Gainsville and coauthor of The Assisted Living Residence: A Vision for the Future. "If you can at least partially rely on a family member, then you might be able to get away with a lower budget alternative." Relatives can also help you navigate doctor visits, locate state and federal resources for seniors, and coordinate care providers.
Community-based care. Another affordable option to help seniors continue residing in their own home longer is a Naturally Occurring Retirement Community. Although each nonprofit association is unique in the services provided to members and pricing, popular options include transportation, home maintenance, and meal services. Beacon Hill Village in Boston, for example, charges a $600 annual membership fee for individuals age 50 and older and $890 for families, with discounts available for those over age 60 who bring in less than $50,000 annually. Members get access to a geriatric care manager who helps coordinate health and long-term care services, rides home from doctor-prescribed procedures, help with grocery shopping or household tasks, a concierge service, and discounts to vetted local vendors.
Long-term care insurance. Purchasing long-term care insurance is a way to shield yourself from high care costs. But this often-pricey product in not appropriate for everyone. A couple, both age 65 in 2008, would need $85,000 to pay for long-term care insurance throughout retirement, according to a Fidelity Investments estimate. Premiums generally increase the longer you wait to buy insurance. "You're buying a product where, if you stop paying for it, it's gone," cautions Judith Feder, a professor at the Georgetown Public Policy Institute. "Even though it's cheaper to buy at a younger age, you maintain the risk of not being able to sustain your benefit and getting nothing for it."
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New government insurance program. The health reform bill, signed by President Obama on March 23, creates a new long-term care insurance program. The Community Living Assistance Services and Supports (CLASS) program will begin in January 2011. Working adults who pay into the voluntary government program for five continuous years will receive a cash benefit averaging at least $50 per day if they become unable to perform the activities of daily living for a period of 90 days or more. "This program will help people stay out of nursing homes longer or to walk in the door with a cushion," says Larry Minnix, CEO of the American Association of Homes and Services for the Aging. Payouts, which are currently scheduled to begin in 2017, will vary based on the functional ability of the participant and will have no lifetime maximum.