When preparing for the future, don't forget about LTC costs
Many recent articles are warning about the future healthcare costs that retirees face, despite having Medicare for their primary health insurance. Medicare does leave 20% of many medical related costs to the Medicare recipient, in addition to a hefty copayment for hospital admission and more. Fortunately, Medicare supplements or Medicare Advantage insurance policies cover the majority of these out of pocket expenses.
When we come close to our 65th birthday our mailbox fills with solicitations for these supplemental type insurance policies. In addition to a supplement or Advantage plan it is prudent to obtain Part D coverage as well with an additional premium. In many cases the total one spends for Part B of Medicare along with any supplement or Advantage plan, plus Part D coverage is less than a person may have been spending on their private or group health coverage. Copayments and deductibles may be less as well.
Medicare costs are going to be increasing due to recent district court decision concerning the Medicare coverage of a skilled nursing home following 3 days in a hospital. The ruling stated that it was discrimination to require “progress” in recovery to meet a Medicare health care standard for recovery care to be considered health care and thus covered by Medicare. In October of 2012 the Obama administration and CMS agreed to change the rules.
Rep. Joe Courtney, D-Conn., recently told reporters “I am confident that over time this will not result in any added cost to Medicare.” As things were, once a person stopped making sufficient progress in recovery in a nursing home, that person's care was changed from health care paid by Medicare, to long term care, paid by cash, LTC insurance, or more likely, Medicaid a welfare program. With Medicare now required to (in many cases) pay for a full 100 days in a skilled nursing home versus the previous norm of 2-3 weeks while actively recovering, costs will not go up? This is ridiculous! The skilled nursing facilities will collect more at the rate Medicare pays which is often more than the private pay rate, and the taxpayers will foot the bill.
Long-term care is the elephant in the room that nobody wants to talk about, insure for, or otherwise plan for that will cause many seniors, and younger, to go broke. Forty percent of all LTC services in this country are delivered to people between the ages of 18 and 64. How many of us can sustain an extra annual bill of $40,000 to $90,000 a year without insurance? And now that Medicare will cover the entire first 100 days in a skilled nursing home (following a 3 day hospitalization) without requiring it to be health care – progress being made – costs will go up.
Many financial publications are filled with articles about how to get the absolute best return on your investments, while ignoring the $40,000 to $90,000 annual bill when someone needs LTC. Surely that is more important than an extra half percent? With Medicare now paying longer for skilled nursing homes, more people will be anesthetized to the costs of LTC. Already a large percentage of Americans think Medicare pays for all LTC as it is.
Romeo Raabe, LUTCF, LTCP works exclusively with the financing of LTC. He writes and teaches the certification courses for several states for Kaplan schools, NAIFA, and JSA, his primary wholesaler.