Long-Term Care Crisis Looms in U.S.

The U.S. is on the brink of substantial growth of its elderly population as baby boomers are approaching their retirement years. Not only will the population over age 65 increase significantly during the next 30 years, but they will live longer than any generation before them, bringing the country's 85 and older population to a record high. While living longer is good news, the elderly face increasing odds of needing long term care---the physical, mental and social care given to those who have a severe, chronic impairment.

Today, the average life expectancy is 76 years---an increase of almost 30 years since the beginning of the 20th century, according to the U.S. National Center for Health Statistics. And, with growing longevity come increasing odds of needing long-term care. Nearly 50 percent of all Americans who reach age 65 are projected to spend time in a skilled nursing facility, a American Association of Retired Persons National Nursing Home Study found.

Long-term care, however, is much more than nursing home care. It also includes home healthcare, assisted living facilities and adult day care centers. It can come in the form of skilled care, which is the most intensive; intermediate care, similar to skilled care except that it is provided on a periodic basis; and custodial care, which involves assistance with the normal activities of daily living such as bathing, dressing and eating.

Most people are surprised to learn that long-term care services are not covered---or covered only on a limited basis---by Medicare or Medicaid. Medicare handles only short-term stays after hospitalization and does not cover nursing home stays beyond 100 days. That's not much help for chronic situations, considering the average stay in a nursing home is 2.5 years, according to the research from Consumer Reports.

Medicaid pays only after the person has "spent down" his or her assets. In other words, recipients must demonstrate poverty to qualify. Poverty levels vary by state, but can be as low as $2,000 in net assets, excluding your home, if married. Furthermore, Medicaid only pays for care in assigned participating nursing homes.

Long-term care insurance is a financial tool you should consider. Many of us spend nearly 30 years of our lives saving for retirement, yet we fail to insure against the possibility of long term care depleting or exhausting that nest egg.

According to the American Council of Life Insurance (ACLI), one out of every 7 citizens will be over age 85 by the year 2030. As a result, the number of these people needing nursing home care could increase by 250% by 2030, placing an extraordinary burden on the already strained Medicaid and Medicare programs.

In the state of New York, for example, total spending on nursing home care for New York residents has reached $8.7 billion annually. By 2030, total nursing home expenditures are expected to rise to $39.4 billion (adjusted for inflation), notes ACLI. Medicaid pays for half the state's nursing home costs, while Medicare pays for 2 percent of short-term nursing home stays. Individuals pay out of pocket for the remainder. Furthermore, Medicaid nursing home spending in New York alone is expected to rise form $3.9 billion today to &17.7 billion by 2030, an increase of 353 percent!

Approximately 70 percent of the working population can afford to purchase long term care insurance, similar to national trends. If those who could afford long term care insurance purchased a policy, state Medicaid expenditures could be reduced significantly. National estimates show that Medicaid could save more than 20 percent of its expenditures.

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