The Foreign Service Journal, March 2003

M A R C H 2 0 0 3 / F O R E I G N S E R V I C E J O U R N A L 15 O ne out of every four Americans will be faced with significant long-term health care expenses, either for themselves or loved ones, at some point in their lives. Furthermore, 57 percent of those currently receiving such care are under age 65. While many people only think of nursing homes when they consider the need for LTC insurance, such coverage can actually be much broader, encompassing assistance to individuals with serious pro- longed physical illness, disability or cognitive impairment (such as Alzheimer’s disease). Other services covered may include, but are not limited to, help with daily activities at home, such as bathing and dress- ing, respite care, assisted living, and adult day care. For most individuals, the case for long-term care insurance is compelling; however, as I will dis- cuss below, it may not be a good fit for everyone. The decision whether to purchase an LTC policy is com- plex and multifaceted and should not be taken lightly. But, at a minimum, consideration of such coverage should be a key element of personal and family financial planning for Foreign Service employees and their families. Why Consider Long-Term Care Insurance? The most obvious reason is that long-term care expenses can be quite steep. The Health Care Financing Administration’s 2002 statistics state that the national average cost of staying at a nursing home is $151 per day and that excludes skilled care. (The cost of home or custodial care — when you need help with day-to-day tasks but not around-the-clock assistance — could be a little less, but not much. Many times, howev- er, home care costs are as much or more than local facilities.) Given that the average stay in a nursing home is 2.5 years, the total cost of such care totals about $138,000. Nationally, the average cost of nursing home care is $50,000 to $60,000 a year. And in the Washington area, the cost of nurs- ing-home care is even higher: nearly $74,000 a year, a figure not uncommon for large cities. Without insurance, the financial impact of such assistance is dramatic. Seventy percent of single people who enter a nursing home are impoverished within one year, and 50 percent of all couples are impov- erished within one year of a spouse’s entering a nursing home. In addition, other statistics com- piled by the HCFA show there is a 1-in-4 chance that lifetime long- term care expenses will reach or exceed $100,000. Compare this to a 1-in-1,200 chance of a $100,000 loss from a fire or accident in your home; a 1-in-240 chance of a $100,000 or greater liability suit aris- ing from an automobile accident; and a 1-in-15 chance of encountering major medical expenses of $100,000 or more. Long-term care insurance can help safeguard assets and protect financial stability during a period of serious prolonged physical illness, disability or cognitive impairment. In this regard, children may help parents pay the premiums for their LTC policies in order to ensure some level of funding for care if needed. Will Government Programs Assist with LTC Costs? Many people may assume that they can turn to Medicare if neces- sary. Unfortunately, Medicare is generally not a viable alternative to private LTC insurance. For one thing, the program was not designed to cover long-term care expenses: current Medicare requirements state that one must be over 65 years of age and must stay three days in the hospital before any long-term Long-Term Care Insurance B Y S TEPHEN H. T HOMPSON FS F INANCES For most individuals, the case for long-term care insurance is compelling. But it is not a good fit for everyone.