Long-Term Snare

Last updated on May 13th, 2019 at 02:36 pm

The cost of long-term care continues to rise, and Americans are not prepared to pay for it, according to the 2006 Cost of Care Survey by Genworth Financial, a Richmond, Va.-based insurance company. The firm surveyed more than 9,000 nursing homes, assisted living facilities and home care providers in the United States during January and February.

According to the Genworth study, living in a nursing home in the United States costs, on average, $194 per day, or $70,912 per year, a 2-percent increase compared with 2005 rates.

In Wisconsin, the average daily rate for a private nursing home room is $199.13 per day or $72,682 a year, and a semi-private room costs $175.46 per day or $64,042.

In Milwaukee, it costs about $180 to $220 per day to live in a nursing home, said Mary Kay Bultman, president and chief executive officer of Bultman Financial Services, a Brookfield-based firm that helps design and implement insurance plans.

Assisted living facilities cost an average of $88.47 per day or $32,294 a year. That is a 7-percent increase compared with 2005.

Nationally, home health aides cost $25.32 per hour, which is a 13-percent increase over 2005. In Wisconsin, home health aides cost between $13.20 and $80 per hour.

Nationally, homemaker services cost $17.73 per hour, a 5-percent increase from 2005. In Wisconsin, homemaker services cost between $14 and $47.25 per hour.

"Everyone’s familiar with how health care costs rise so quickly. My personal opinion, (long-term care) is a segment of overall health care but they have the same in sync health care pressures," said Eileen Gillespie, long-term care specialist with Milwaukee-based Northwestern Mutual Life Insurance Co. Inc. "Salaries continue to increase, nursing care, nurses salaries are higher than personal health aides. Like hospital care (nursing homes) have uncompensated health care also. Nursing homes are 24-hour per day health care, which is more expensive than any other consumable."

In addition, Public Opinion Strategies, an Alexandria, Va.-based national political and public affairs research firm, was commissioned by Genworth Financial to conduct a national poll regarding long-term care. About 600 Americans age 40 or older were surveyed.

About 65 percent of those surveyed have no long-term care plans for themselves or for their spouses. According to the survey, most Americans incorrectly believe that their savings or the government will provide enough money to pay for their future long-term care.

Too few Americans are buying long-term care insurance to pay for the extraordinary costs of long-term care that they may have some day, according to experts.

"A lot of people aren’t buying it," said Michael Noonan, general agent for Cyganiak Planning, a Brookfield-based financial planning and insurance agency.

"Let’s just say it doesn’t sell itself," Bultman said. "You have to work at it, definitely. Convincing people to get long-term care insurance is a hard sell. Long-term care is the kind of issue where most people don’t want to talk about it."

Long-term care insurance can also benefit younger people if they suffer a serious accident that requires them to be cared for.

The risk for younger people who choose not to get long-term care insurance is they might not be able to get it once they need it, Bultman said. For people who are 65 and older, there is a one-in-two chance that they will eventually need long-term care, she said.

The government will pay for lower-income people to receive long-term care, said Bultman Financial treasurer Ralph Bultman. Wealthy people have the financial resources to pay for long term care. Middle class people must have their assets depleted before the government pays for their long-term care, he said.

Long-term care insurance can pay for the costs of living in a nursing home, or other forms of long term care, allowing people to keep their assets and pass them on to their children.

Long term care insurance could become in more demand after a recent federal government rule change that requires people to give their assets away at least five years before they receive benefits from Medicaid. Money that is not given away five years before the person needs long term care must be used to pay for that care. The previous rule was three years.

"Now it’s a five year look back, which is going to make it much more difficult to make people get rid of their assets to go to title 19 (Medicaid)," Noonan said. "That makes long-term care coverage that much more important. The reason people buy long-term care insurance is to protect assets."

Although the government will not pay for long-term care expenses for wealthy Americans, business owners can deduct some of the costs for long-term care insurance from their federal income tax, Ralph Bultman said.

For the owner of a C corporation, the cost of long-term care insurance is 100 percent deductible.

For the owner of an S corporation or a limited liability corporation (LLC), a portion of long-term care insurance cost can be deducted, depending on the person’s age. The cap on the deduction ranges from $280 for people 40 years old or younger to $3,530 for people 71 and older.

"So, if you own a business, there is a very good chance you can pay for at least part of the cost for long-term care insurance with pre-tax dollars, if not all of it," Ralph Bultman said.

In addition, members of the Metropolitan Milwaukee Association of Commerce (MMAC) can receive a discount for long-term care insurance from MassMutual or John Hancock.

The typical 50-year-old couple will pay about $2,321 per year for long-term care insurance. For that, they would each receive a benefit of $5,400 a month for three years, or a total benefit of $194,400 for each spouse, Mary Kay Bultman said.

"The cost of long-term care insurance (for a 50-year-old couple) is about $2,300 a year," she said. "The cost of long-term care can be $100,000 a year. So (the insurance) is a pretty good return on investment."

"Americans are just beginning to realize they need to take care of their own long-term care costs," Gillespie said. "Some Americans are aware that Medicare is not going to be there. Title 19 is not attractive to many people because you have to be impoverished to be eligible. As people become aware of the economic circumstances, they realize it’s not a god plan to rely on title 19."

Still, the number of people buying long-term care insurance is relatively small. According to Windsor, Conn.-based LIMRA International, a financial services organization that studies consumer behavior, only about 6 million people in the United States have long-term care insurance.

"Everyone would clearly agree the market is under-penetrated," said Dave Simbro, vice president and actuary for Northwestern Mutual.

"I think it’s growing, but not to the industry’s satisfaction," Ralph Bultman said.

Small Business Times reporter Bradley Wooten contributed to this report.

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