Most of us are going to need some form of long-term health care as we age and the costs of such care continues to rise.
According to the U.S. Department of Health and Human Services, about 70% of people over age 65 will require some type of long-term care (LTC) services during their lifetime, and more than 40% will need care in a nursing home. Of course, your personal health history may increase or decrease your chances of needing long-term care.
One of the big misunderstandings about LTC is that services are covered by Medicare. However, Medicare only addresses short-term skilled services or rehabilitative care; it does not cover “custodial care,” or assistance with activities of daily living. The only government-provided insurance that does provide LTC coverage for this is Medicaid, but it is difficult to qualify for it.
If your total net worth is below $300,000, it makes sense to rely on Medicaid for future LTC costs. On the other end of the spectrum, if you have more than $1.5 million, you can choose to self-insure, where you tap into your assets to pay for care. If you fall between Medicaid coverage and self-insurance, you should think about how to protect yourself against long-term illness that can eat away at your financial health. At this point, you should consider purchasing long-term care insurance. The biggest problem with long-term care insurance is that it is expensive and it is hard to justify spending thousands of dollars a year on insurance that you may never need.
Getting old is hard enough as it is, but protecting yourself and your family from rising LTC costs can make all the difference in the world.