Archive for April, 2012

March 2012 Cost of Care Survey (Genworth)

April 23, 2012

This latest, by Genworth Financial, validates the recent Met Life Mature Market Institute annual cost of care survey.  While more or less confirming the earlier reported numbers, the Genworth study provides more realistic assisted living costs.

Nursing Home (private room).  National: $222/day, $6,753/month, $81,030/year.  Metro-Denver: $237/day, $7,194/month, $86,323/year.

Nursing Home (semi-private room).  National: $200/day, $6,083/month, $73,000/year.  Metro-Denver: $220/day, $6,677/month, $80, 118/year. 

Assisted Living.  National: $3,300/month, $39,600.  Metro-Denver: $3,948/month, $47,370/year.

Home Health Aide.  National: $19/hour.  Metro-Denver: $22/hour.

Homemaker/Companion Care.  National: $18/hour.  Metro-Denver: $21/hour.

Adult Day Care (8-10 hours).  National: $61/day.  Metro-Denver: $72/day.

We know that inflation has been driving the cost of long term care services upward.  The planning question is: “by how much?”  Genworth Financial has been tracking the cost growth rates.  The average annual compound rates of increase for the past five years are as follows:

Nursing Home (private room).  National: 4%.  Metro-Denver: 3%.

Nursing Home (semi-private room).  National: 4%.  Metro-Denver: 4%

Assisted Living.  National: 6%.  Metro-Denver: 4%.

Home Health Aide.  National: 1%.  Metro-Denver: 1%.

Homemaker/Companion Care.  National: 1%.  Metro-Denver: 1%.

Why have home health aide and homemaker/companion care costs been flat over the past five years?  The cost of these services is made up almost entirely of labor.  There continues to be much relatively low-cost available labor.  Many people (including myself) believe that with the aging of America, there will be less available labor at the same time that demand for long term care services will increase.  Thus my prediction is future long term care service costs will increase at a greater rate than we are experiencing today.  This will be particularly true for home care.

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence.  Long term insurance policies vary from company to company & within the same company.  Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice.  Consult your tax advisor or attorney for these matters.

 

© Raymond Smith, The Long Term Care Specialist, 2012

Most People Don’t Know A Train Wreck…

April 23, 2012

…is headed for their retirement plan.  Sometimes, people with whom I speak aboutabout the need to plan for the inevitable high cost of long term care services ultimately do nothing.  By default they become their own insurance company (That is, they carry the financial risk on their own shoulders.).

I do understand doing nothing when there is a struggle to pay for the basic necessities of life…I routinely advise people with very little income and net worth to not buy long term care insurance.  I also sadly understand when someone has waited too long and health history makes him or her uninsurable.

Here is what makes me a little crazy:  One year in a Metro-Denver nursing home, or 11 hours per day of home care, will cost $86,000 today.*  Six years from now it will cost $100,000.  A healthy 60-year old, either married or in a committed relationship, can buy a good basic long term care insurance policy from a leading company for $1,662 per year.  For a healthy 40-year old, the annual cost would be $1,077. 

$86,000 compared to $1,662.

Who has put aside $86,000 to pay for needing a year of long term care?  What if more than one year of care is needed?  What if both people need care?  What will $86,000 or $100,000 of unplanned expense do to anyone’s retirement plan?  This is the train wreck I am talking about…and some do nothing to prepare.

On the one hand we have the cost of care at $86,000 per year.  On the other hand, defending against the risk only costs $1,662 per year (the cited insurance policy will pay for three years of care and includes inflation protection).  I would be most appreciative if my readers could help me to understand why some folks do not see the value in long term care insurance.  The feedback from both those who have long term care insurance and those who do not would be helpful.

* Please see the accompanying eNewsletter article, March 2012 Cost of care Survey.

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence.  Long term insurance policies vary from company to company & within the same company.  Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice.  Consult your tax advisor or attorney for these matters.

 

© Raymond Smith, The Long Term Care Specialist, 2012