Scott Sylvainus
Scott Sylvainus, an Upper Nazareth Township supervisor and a financial advisor with Mutual of Omaha, said people should prepare now for their long-term care plans. (lehighvalleylive.com file photo)
When the day comes that your health fails and you are not able to perform daily activities like bathing, cooking and cleaning, will you have the money set aside to help pay for those needed long-term care costs?
That's the conversation many financial planners would like people to have long before their -- or a loved one's -- faculties diminish.
"So many people fail to plan," says James Luce of Lehigh Valley Eldercare. "Then when it's too late, instead of an advance plan, it becomes a crisis plan. It's a tough season of life when that happens." (Courtesy photo)
About 70 percent of people who reach age 65 will need some form of long-term care at some point in their lives, according to the U.S. Department of Health and Human Services.
Long-term care focuses not necessarily on medical needs but on typical activities of daily living. Examples of assistance include housework, shopping, taking medications and using the toilet.
Unless an individual is independently wealthy, that person will find themselves in a difficult position financially when seeking a home health aide, assisted living facility or 24-hour care nursing home, according to James Luce, a representative with Lehigh Valley Eldercare.
"One thing I want to say is that so many people fail to plan," Luce said. "Then when it's too late, instead of an advance plan, it becomes a crisis plan. It's a tough season of life when that happens."
The Long-Term Care Group, a data collection agency, reports the average cost by state for various long-term care services.
In Pennsylvania, costs for a home health aide average $63,000 for a year, according to the group. A one-bedroom unit in an assisted-living facility costs about $56,000 annually and a semi-private room in a nursing home can cost $108,000 per year.
The average yearly price tag in New Jersey for an aide is $53,000; $76,000 for assisted living; and $125,000 for a nursing home.
Luce said it is very difficult for most people to come close to paying those bills without having long-term care insurance.
Scott Sylvainus, a financial advisor with Mutual of Omaha, said while about 70 percent of people over age 65 will need some form of long-term care, only about 11 percent actually have a plan in place when the need for those services arises.
Medicaid is a federal and state insurance program that covers long-term care for low-income and needy people.
"The government plan is an option for some people," Sylvainus said. "The only problem is you have to become destitute to qualify."
People who need long-term care would have to burn through all but $2,500 of their assets to qualify for Medicaid, Sylvainus said.
Long-term care insurance would help prevent someone from spending money they may have set aside to take care of a spouse or had planned to leave as a legacy for children.
"Someone may work his whole life to build something for himself and his family to live the American dream," Luce said, "only to lose it all to pay for long-term care."
Sylvainus and Luce each said people should consider paying into a long-term care insurance plan as soon as they are able. Premium costs are lower for younger people and insurance programs may not accept people who have existing health issues for that type of insurance.
Sylvainus gave an example of a person who might require long-term care at the age of 83. A person who acquired long-term care insurance at 55 would pay less in total premiums through the years than someone who waited to buy the insurance until they were 65 or 75.
The average age of a new applicant for long-term care insurance is 57, according to the American Association for Long-Term Care Insurance.
The older one gets, the more likely the individual will be rejected by the insurance carrier due to unacceptable health.
Fourteen percent of applicants in their 50s are rejected, according to the association. That number goes up to 23 percent for people age 60 to 69; 45 percent for those in their 70s; and an 80 percent rejection rate for those who are 80 years or older.
"The earlier you can get in, the better," Sylvainus said. "If you wait too long, then it could be too late for you to qualify."
Sylvainus said it may be in a person's best interest to not only consider insurance for themselves but also for their parents.
A person planning their own retirement needs to consider the possible financial burden of paying for the care of a parent, Sylvainus said.
"It definitely should be part of everyone's retirement planning," Sylvainus said.
Long-term care insurance could allow someone to continue to live at home while receiving assistance, which is not an option for a person who relies on Medicaid for support. Medicaid requires a person to go into a nursing home.
Luce said many people do not realize that long-term care costs in the U.S. are "horrifyingly expensive."
"There are options for people who have the courage to plan ahead," Luce said. "I talk about the stuff that nobody wants to talk about. Appropriate planning gives people the freedoms they want and need."
John Best is a freelance writer. Find lehighvalleylive on Facebook.