Consumers Think LTC Costs Are Going Down - Is the ACA to Blame?

It's certainly no surprise to insurance and financial advisors that many Americans nearing retirement grossly underestimate their future long-term care expenses.

A new survey by the Nationwide Financial Retirement Institute confirms this. It found that affluent Americans over the age of 50 estimate their future LTC costs at an average of $36,220 per year. In reality, such care could prove much more costly.

The federal Administration on Aging says current annual LTC costs range from $32,000 to $56,000 for basic homemaker services, and from $55,000 to $256,000 for a private room in a nursing home facility.

The average annual cost of a nursing home (approximately 27 percent of LTC involves a nursing home stay) is expected to be $265,000 by 2030.

Some may be discounting the risk and underestimating their future costs because they mistakenly believe changes brought by the Obama administration’s healthcare reform will cover their LTC costs.

Respondents to a similar survey in 2012, before the Affordable Care Act was generating daily headlines, estimated their future LTC costs at $78,920 per year.

“This drastic drop could be due to the media’s focus on the Affordable Care Act and people’s misconceptions about what it covers,” said John Carter, president and chief operating officer of Retirement Plans, Nationwide Financial. “The reality is we can’t count on someone else to fix this problem. We will have to fund our own long-term care costs in retirement.”

In fact, only 28 percent of respondents to this year’s survey correctly said that the ACA does not assure LTC coverage.

“Unanticipated long-term care costs can derail an otherwise sound financial plan,” said NAIFA President John Nichols. “Medicare and regular health plans, even under the Affordable Care Act, won’t cover them. The good news for those who plan ahead is that products and strategies are available to offset the risk. It’s important for those planning for retirement to consult professional advisors so they aren’t caught unaware.”

A comprehensive long-term care insurance policy will typically provide a daily benefit that may help pay for:

Adult day service centers Hospice care Respite care Assisted living facilities Alzheimer’s special care facilities Nursing homes Home care services generally covered under LTC policies include:

Skilled nursing care Occupational, speech, physical, and rehabilitation therapy Help with personal care Some life insurance policies offer accelerated death benefits that policy holders can use to pay long-term care expenses. A professional agent can help clients determine the best way to address their potential LTC needs.

The risk is significant. According to the Department of Health and Human Services, some 70 percent of Americans over age 65 will need LTC during their lifetime.

Much additional information is avaialble from the 3in4 Need More campaign.
  • Posted January 27, 2014 IN

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