Fidelity Investments, a leading mutual fund company which manages the 401K retirement assets for many Americans (Fidelity manages billions in assets), recently released results of a study which found a 65-year-old couple needs $85,000 on average to cover insurance costs for long-term care such as nursing home stays in retirement.
However, this would be the amount required just to pay for the long-term care insurance premiums. If someone does not have long-term care insurance, they can expect to pay that much per year, just for a nursing home ($85,000).
Fidelity also reports that just about 5 million Americans are covered by long-term care insurance policies, a number which has remained mostly flat for the last 10 years. At the same time, the number of Americans needing elder care will increase to 27 million people in the next 30 years.
I have found that most Americans assume that Medicare will pay for a nursing home and just don't think about needing to pay for these services. This is because Medicare does pay for care in a nursing home in certain situations, for up to 100 days. And it seems nearly everyone has a senior relative who was in a nursing home for a moment and the care was paid for by Medicare and this builds the assumption that Medicare pays for a nursing home forever.
Seniors only qualify for the Medicare nursing home benefit after a major medical event, such as a stroke, hip replacement or other major surgery and typically the care is considered rehabilitation. When the 100 days is up, the coverage is up, and sometimes it does not even cover 100 days.
After the Medicare benefit expires for a nursing home stay, seniors must decide if they want to remain in the nursing home and pay the fees, or move to their home and hire a Senior Home Care Agency or move into an Assisted Living Community where they may need to also hire a private caregiving service. Long-term Care Insurance usually covers caregiving for seniors in any location - at home or in a senior care facility or Assisted Living Community.
Caregiverlist.com contacted some nursing homes around the country in May to find out their daily rates. Here are the daily costs in these nursing homes:
Balboa Nursing & Rehab Center, San Diego, California: $260 per day for private room/$225 day for semi-private room
The Village Healthcare Center, Hemet, California: $334 per day in a semi-private room
John Hopkins Bayview Care Center, Baltimore, Maryland: $210 per day for a private room
Senior Citizens Home, Henderson, North Carolina: $175 per day in a private room, $150 per day in a semi-private room
Westminster Commons, Atlanta, Georgia: $165 per day in a private room, $155 per day in a semi-private room
Coral Reef Nursing & Rehab Center, Miami, Florida: $295 per day in a private room, $285 per day for a semi-private room
Stoneybrook Retirement Community, Manhattan, Kansas: $184 per day in private room, $147 per day in semi-private room
Neuro Rehab Center, Worcester, MA: $265 per day in a private room, $245 per day in a semi-private room
Let's do the math for 365 days in a year times these daily rates:
$165 = $60,225.00 a year
$175 = $63,875.00 a year
$184 = $67,160.00 a year
$210 = $76,650.00 a year
$260 = $94,900.00 a year
$265 = $96,725.00 a year
$295 = $107,675.00 a year
$334 = $121,910.00 a year
Those are the actual nursing home costs. These fees do not cover "extras" such as beauty parlor visits and clothing. Keep in mind that in most nursing homes, there is just one Certified Nursing Aide taking care of 10 or more patients, so one-on-one care is not provided. For this reason, if other dynamics are appropriate, some seniors will opt for in-home care.
How much do Senior Home Care Agencies charge? From $15 - $26 per hour and from $150 - $275 per day for live-in care, depending on the area of the country you live in.
Annual cost of in-home elder care provided by a professional Senior Home Care Agency:
$18 per hour for 20 hours of care per week = $18,720.00 per year
$190 per day for live-in care = $69,350.00
Senior care in the home does provide the advantage of one-on-one care but seniors must also be able to pay for the costs of food and maintaining the home.
So the annual cost in a nursing home is easily equal to the cost of all the long-term care insurance premiums one could pay, according to Fidelity's study.
Long-term Care Insurance can be sold in a variety of packages and depending on your age and health conditions upon purchase, you could spend from $2,000 on up per year - - but $5,000 a year is better than $80,000 for one year of nursing care.
You can learn more about long-term care insurance form our "expert" Chris Lynch and you may get answers to your questions to Chris in our Ask the Expert section. Chris is one of the top long-term care insurance professionals in the nation and has also experienced caring for his own family members: Caregiverlist.com's Ask the Expert.
And what do you do if you have no money at all, except for your monthly Social Security check? Well, the interesting answer is, the U.S. government will provide you with admission in a nursing home, at no cost to you, via the Medicaid program. But this is welfare-for-seniors and managed by each state. Usually you cannot own a home and may have no more than $2,000 in assets. You can no longer give your assets away to go on this free program as now Uncle Sam has a "look back" law. At the same time, most seniors probably don't want to be at the mercy of the government's care unless it is a must.
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