Deciding where to live in your golden years could provide you a 24-karat paradise or a fool's gold pariah. Health care has a new landscape since February 2010, and much of it is still being made up as interpretations of the law develop under the new health care legislation.
If you're not ready to retire and you don't want to be put out to pasture with the rest of the thoroughbreds past their prime, then do your homework when it comes to walking those fields of gold and the decisions about where you'll spend your end days.
Quality of life is a major concern of anyone who knows long-term care may be a possibility as they age. Choosing where you'll live before you die is a major decision and can be very costly if you make the wrong choice.
The high cost of insurance is one of the challenges anyone faces in thinking about how to pay for long-term care. The risk that you'll need nursing-home care or a home health aide is certainly real. About 70 percent of seniors eventually need help, and nursing homes, the most intensive kind of care, can cost $200 to $300 or more a day.
But that also means long-term-care premiums are high enough to take a substantial bite out of your retirement savings. And the policies can be confusing, with countless combinations of options, limitations and premiums to cover services you may not need for 20 to 30 years.
For many people, insuring for long-term care doesn't make sense. But whether you buy coverage, long-term care is a crucial part of your overall retirement strategy. The subject is a sensitive one. This is, after all, a time when you'll be dependent on others for help with basic tasks, like eating or getting in and out of bed. That causes some people to avoid thinking about the problem until it's too late.
For others, imagining such vulnerability can cause them to buy more insurance than is practical. The best approach: turn down the emotional temperature of the decision. According a survey by MetLife, the average cost of a private room in a nursing home is now about $80,000 per year and rising. With this kind of risk -- compared to things like dental and vision insurance -- LTCI warrants a much more prominent place in benefits packages.
A little-known provision slipped into the heath care law that could cost some Americans upwards of $2,000 a year, according to Fox News. The CLASS Act, otherwise known as the Community Living Assistance Services and Support Act, is the federal government's first long-term care insurance program. Under-reported and under the radar of most lawmakers, the program will allow workers to have an average of roughly $150 or $240 a month, based on age and salary, automatically deducted from their paycheck to save for long-term care.
Here's how the program will work: The federal government will approach employers soon about alerting workers to the proposed deduction. The deduction will work on a sliding scale based on age. Younger workers will be charged less, older workers more. Estimates range from $140 to $240 per month for premiums. After a five-year vesting period, enrollees who need help bathing, eating or dressing will be eligible to take out benefits, estimated to be around $75 a day for in-home care.
The biggest problem we face is most Americans still think Medicare or their medical insurance covers the cost of long-term care, according to LTC Insurance Shopper. The CLASS Act addresses this problem by making a very clear statement: You have to pay for your own long-term care. You either have to pay by using your savings, the $50-per-day CLASS Act benefit, long-term care insurance, or a combination of these.
Most of the 10 million Americans who own long-term care insurance, own it because they've seen friends or family spend down their assets before qualifying for Medicaid. The CLASS Act will help alert the rest of the country to the fact that they need to financially plan for their future long-term care needs.
The CLASS Act will not be an option for those who are already disabled (and unable to work) or those who are retired and don't want to work. In order to qualify for benefits, one must pay premiums for five years and must be working for at least three of those five years.
The health care reform bill requires that the CLASS Act program be actuarially sound; not funded by taxes, but all benefits must be paid from the premiums of the participants in the program; and anyone who is working can enroll in the program, regardless of their health history.
Because of those requirements, the premiums proposed by federal actuaries for the program are two to three times more expensive than a comparable long-term care insurance policy.
In a group program, the employer gets a master contract from a long-term care insurance carrier and can enroll on the Web. In a multi-life program, each employee and his or her spouse can meet with a long-term care insurance specialist and get an individually owned policy if appropriate. An LTC insurance policy is appropriate if transferring some or all of the risk is deemed best for one or both of the marriage partners.
The employee also can extend the discounts and free educational resources to any family member anywhere in the country, according to LTC Financial Partners. Employers that do sponsor the program will need to alert employees that this is an opt-out program, or run the consequence of employees later asking for the return of deductions.
However, before you get all excited about this latest government entitlement, remember these points about the CLASS program: CLASS is likely to unravel from severe adverse selection -- a feedback loop between greater concentrations of less healthy individuals in the risk pool and rising premiums. Also, CLASS is unnecessary because the private sector already provides a variety of alternatives for LTC insurance.
Finally, CLASS constitutes a greater intrusion of the federal government into the national economy, according to The Heritage Foundation.
