Planning for Your Own Care

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Everyone must plan for his or her own financial security. That is a constant and recurring theme in this column. But, while most people can count on spousal Social Security or survivor benefits, regulations currently prohibit same-sex partners from receiving these types of assets.

Why is planning for long-term care a critical component in retirement and estate planning? People don’t die…or at least not as quickly or surely as they used to with certain illnesses. Think of the types of illnesses that almost always used to result in death such as a stroke, heart attack, cancer, etc. these illnesses are no longer necessarily terminal, but they can certainly affect your quality of life. So planning for long term care is becoming increasingly important.

Another change or misconception is that the popular belief that most long-term care is delivered outside nursing homes. In fact, according to the national academy on aging, of all of the Americans who require long-term care, less than 19% live in nursing homes. Long-term care coverage can provide you with the dignity of receiving care in your own home, an assisted living facility, an adult day care or, if needed, nursing homes care.

In order to put this into a local perspective, Harris Rothenberg International conducted a study August 2005 to look at the costs of long-term care nationwide. In Austin, the average costs of care are:

> Private nursing home = $150/day or $58,000/year

> Semi-private nursing home = $127/day or $46,000/year

> Assisted living = $4,000/mo or $48,000/year

> Live-in Home Health Aide = $200/day or $73,000/year

And the choices and options for paying for the above care are limited. Disability insurance will not cover these costs as such policies are only designed to replace income – plus, benefits are not usually paid after retirement. Major medical insurance only pays for skilled care designed to rehabilitate your condition. And then, after your retirement, the skilled care coverage is termed Medicare, which also does not provide coverage. Medicare only covers skilled nursing care but, by definition, long-term care is unskilled care or custodial care. Medicaid is there to cover these expenses, but only after you have spent down all of your assets. So it is there for you, but you hope never to have to access Medicaid. If you do need to access Medicaid, there is no freedom to choose where you receive care and home health care is not an option. Even if you do meet income and asset qualifications, there is a 5-year look-back virtually eliminating so-called “Medicaid Planning.” therefore, chances are, you will pay for your own long-term care.

In 2006, the National Gay and Lesbian Task Force Policy Institute issued a report titled “Make room for all” that explored the ramifications that all people are living longer coupled with the fact that statistically gays and lesbians are more likely to enter this stage alone. Nearly 80% of gay and lesbian seniors have no life partner or significant other, which is 250% higher than the general senior population. In fact, nearly 90% of gay and lesbian seniors have no children to rely on for aid while only 20% of heterosexual seniors are childless. For many, being a childless senior may be exactly what they intended, but the report does document some ramifications:

>  Medicaid regulations protect the assets and homes of married spouses when the other spouse enters a nursing home or long-term care facility; no such protections are offered to same-sex partners. For married couples, if a spouse is in a nursing home and needs to go on Medicaid, the healthy spouse can remain in a home that is jointly owned. However, for domestic partners, generally a healthy partner cannot remain in a jointly owned home and have Medicaid pay the costs of the nursing home, unless the healthy one buys out the ill partner’s share.

>  Social Security pays survivor benefits to widows and widowers, but not to the surviving same-sex partner.

 

Before you rush out to find a surrogate mother or adopt a Malawian child, we will discuss how long term care insurance might help fill in some of these gaps…and it is usually much less expensive than raising a child.

According to Doug Zullo of insurance Designers, long-term care insurance could be a viable option as few people have the financial resources to pay for the long-term care they might need as a result of a serious illness, injury or disability. How costly is the impact of long-term care? Consider the following statistics from John Hancock insurance:

> National average cost for one year of nursing home care ~ $75,000

> Annual projected cost for needing care in 30 years ~ $250,000

> Projected cost of three to five-years of care in 30 years ~ $750,000 – $1,250,000

Source: John Hancock cost of care Survey, conducted by CareScout, 2008

The potential need for long-term care is not unique to our community. In fact, according to the U.S. Department of Health and Human Services, 70% of people over age 65 will require long-term care services at some point in their lives. So where our needs are the same, not all coverage is the same. In fact, Zullo points out that the John Hancock policy is one of the best for the community. All long-term care insurance policies help protect your assets by providing you with a pool of money to help cover the increased costs of care, but some policies like John Hancock’s do provide extra considerations for same-sex partners:

> A benefit that allows you to use your partners benefit dollars once yours are exhausted

> Discounts for partners

> The ability to choose where you can receive care – including your home

Making the decision to actively address how you would and could pay for potential long term care expenses is important for a variety of reasons, including love and respect for your partner and loved ones, to protect your personal sense of pride an dignity, ensure receipt of wealth destined for future generations and even the opportunity to express choice in your potential method of care. As the Wall Street Journal stated recently, “for a couple turning 65, there is a 70% chance that one of them will need long term care.” and unfortunately, the conundrum of long-term care is that only healthy people need apply. Once you need long-term care, you can no longer apply for the insurance.

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