Long-Term Care:
Funding the Financial Gap

BY CAROL AKRIGHT

one of us likes to think ahead to the health risks of aging. But, it is likely that one day, you or your spouse or life partner will develop a medical problem that requires outside help. One of you may fall, resulting in a broken hip and rendering you partially or fully immobile. You could suffer a stroke, in which case you might need caregivers to come into your home. You could also develop any of a number of conditions that could mean you need to spend time in an assisted living center or nursing home.

Such a crisis would not only interrupt your normal life and your ability to meet family responsibilities, it also could have a major financial impact on you and your family. Because the potential for such incidents is real, no matter who we are, we all would do well to address the serious financial considerations posed by such possibilities.

But, what's the best way to plan ahead for medical emergencies or a chronic long-term illness? The answer is that part of your strategy should concern how to fund the financial gap between your current health insurance coverage, including Medicare, and the real costs of long-term care.

Most people don't know that the average cost of nursing home care nationwide today is $56,000 a year. They also probably don't know that Medicare will cover only the first 100 days - and that is only if you come straight from a hospital stay!

Anyone who knows a family dealing with an Alzheimer's Disease patient is aware of the full range of services such an individual requires, whether at home or in a special unit of an assisted living facility. Home care can range from $100 to $500 per day. Although the cost of an assisted living situation with a private room depends upon the level of care and the size of the accommodations, a studio apartment typically can cost anywhere from $1,500-$3,500 per month.

Many of these services are not covered by a basic health insurance plan. Furthermore, most health insurance policies have a lifetime cap that may be $1,000,000, or less. Do you know what your policy declaration page states about your coverage cap? It's time to ask.

What You Should Consider
I suggest that everyone assess their potential need for long-term care services and their ability to pay for them.

• First, take a look at your family health history - your parents' lifetime health, grandparents' lifetime health, and your own. Unfortunately, many chronic diseases of aging have a genetic component. If your grandfather died of heart disease and your father also has a bad heart, you stand a greater chance of developing a heart condition yourself. The same goes for cancer, Alzheimer's, stroke, and diabetes. Also, look at your own health status. What you're trying to assess is whether it is likely you'll die quickly, at a younger age, or linger with a debilitating chronic condition that requires long years of care.
• Next, look at your financial assets. Do you have multiple health insurance policies that will combine to cover most of your health care costs? Can you self-insure (i.e., pay for years of care out of your own pocket)? Or should you consider buying a separate, long-term care health policy to fund the health care gap? These policies are relatively inexpensive (starting at several hundred dollars per year) if you buy them while you're still in good health and in your forties, fifties, or even sixties.

  The older you get, the more expensive they become. You can also manipulate the premium costs by changing certain features (number of years of coverage, dollar amount of daily benefit requested, and length of elimination period - the number of months you must wait after a triggering event before the policy begins to pay). (See sidebar for features you may want included in a long-term care insurance policy.)

  Another option is to check with your life insurance carrier to see if they'll add a long-term care rider on the policy, allowing you to draw down on death benefits to pay for health care costs while you're still living.

• One way to keep down the cost of health care is for family members to do a lot of the care giving services. With spouses or partners, you may have to take time off work or allot significant hours of your day to helping your ill partner with the tasks of daily living - feeding, bathing, toileting, walking, etc. If you're single, do you have a sibling, niece or nephew, or friend who can stop what they're doing, come stay with you, and provide this care on an interim basis - or longer?

Put It in Writing
Once you have planned for, and funded, the cost of long-term care, you still have many issues to revolve to ensure that you receive the best possible care. Most of these involve choosing people to help you if you become chronically ill or suffer some mental incapacity.

• You need to appoint someone with a durable power of attorney, enabling that person to handle your financial affairs if you are either too sick or mentally disabled. The individual you choose can handle your banking and investments, sign legal documents on your behalf, and act in all financial matters to ensure that your needs are being met and your financial obligations handled. Obviously, this must be someone you trust. It also must be someone who has the financial savvy to do a good job in this most important role.
• You need to designate someone with the health care power of attorney. This person will have the authority to make medical decisions for you when you cannot. You may appoint several people who must jointly make such critical decisions as authorizing surgery, medications, and even cessation of life support. If you have children, you may want them all to have this power and have to agree on such health care options.
• You can sign a living will, in which you state your preferences regarding life support, nutritional support, and other terminal illness matters. However, a living will may not cover all situations that could occur. You still should give someone the health care power of attorney.
• Some hospitals and doctors have a document called a directive to physicians. Although this document is valid at that particular medical facility, you should be aware that it might not be honored if you are out of town when you become ill. In contrast, the health care power of attorney is a legally enforceable document that must be honored in any state and at any facility.
• The final step is simple, but vital: Be sure your family members and significant others have copies of all such documents, so they can access them in an emergency.

If you have no one who is available or appropriate for carrying out the roles of powers of attorney, you can hire a personal representative who can be given legal authority to act on your behalf. This person must be someone you trust to do what is in your best interest in all matters. You would work out a financial arrangement to pay for her/his services, which might include many of the caregiving tasks already discussed, as well as matters after your death, such as handling your estate as executor of your will and coordinating all funeral arrangements and burial.

Involve Others in Your Plan
While you may not have thought of it this way, long-term health care is a family affair. An acute medical crisis may leave you unconscious, helpless, or in some other way unable to make the important medical and financial decisions we've noted.

If you do have a spouse or partner and/or children, they are going to want to help you. How much they help you, and in what ways, can largely be up to you, if you plan in advance and clue them into your plan.

Look at your spouse/partner's health and his or her ability to handle crises. He or she may - or may not - be the person you can really rely upon to step up to the plate and take charge of a situation.

Among other family members, some are going to be more able and willing to help than others. Some can come first, some last. Perhaps you'll want to create a Medical Crisis Family Plan in which you and your siblings and children discuss who can drop what they're doing, come at once and help you. Discuss having a telephone tree and having each person on that tree know whom to call in a medical emergency. Do this for each other.

For longer-term medical crises, you may need to invite the help of those caregivers you would prefer in advance, discussing your wishes regarding such things as whether you'd want to ever go to a nursing home or assisted living center.

If you don't want to live in a facility, are you thinking you might go live near, or with, one of your children? If so, it's time to start talking about this. Adding a parent to the household may not be what your child wants. Even your sister or brother may not be available to you in ways you had hoped. It's better to find this out now and make alternate arrangements than to wait until a crisis in health care occurs and hope for the best.

Just as we have seen our parents age and go through the later stages of care, we, too, will one day face ill health and the end of our lives.

Thinking about these matters may be the last thing you want to do when you're healthy. However, planning for long-term care long before you need it means you will not have to worry about the thing you may dread the most - losing control of your health care destiny as you age.

CAROL AKRIGHT, CFP, is a registered principal, stockbroker, insurance agent, and branch manager of Associated Securities Corp. in Corrales, NM. She can be reached at 800-279-1970 (e-mail: akrightcr1@aol.com).

(This article is reprinted from the Winter 2003 edition of Enterprising Women magazine. Copyright 2002 Enterprising Women Inc. Reproduction in whole or part is prohibited, except by permission of the publisher.)

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