There are three basic ways to pay for long-term care in a nursing home: Medicare, Medicaid or private pay (out of pocket or by using long-term care insurance).

 Medicare is the federal program offered to those who are needing a skilled level of care after a 3 day hospital stay. Skilled care is best described by the type of care you need due to a hip fracture or stroke - therapy on a daily basis.

 Medicare is limited in the number of days it will pay - up to 100. Medicare pays 100% for the first 20 days (after the 3 day hospital stay and if skilled care is needed), beginning on day 21-100 there is a copayment required with Medicare. Most Seniors have a

Medicare Supplement policy. Medicare supplements will pay in conjunction with Medicare. Once Medicare stops paying for care, most supplements will not continue to pay.
 

If you have exhausted Medicare payments the only other options are Medicaid and paying out of pocket (private pay). Medicaid is available for those individuals that are low income or have limited resources. Medicaid is the state welfare program and has limitations as to the amount of assets you can own and the amount of income you may receive each month before you are eligible.

 The federal government has instituted restrictions on the transferring of assets out of an estate to qualify for Medicaid. There is a look back period of 36 months or 60 months if a trust has been established. A law was passed in 1996 making it a crime to shift assets to become eligible for Medicaid.

 In 1996 the average cost for a year in a nursing home averaged between $36,000 and $50,000. This can be financially devastating. Especially if a patient stays the average of 3 years or even longer. Some patients have spent more than $100,000 or even $500,000 on long-term care expenses.

 Besides paying out of your own pocket you can purchase long-term care insurance. This insurance must be purchased prior to needing long-term care. The eligibility for the insurance is based on your current health. Therefore if you are already ill, you probably will not be insurable.

 Most financial planners recommend that LTC insurance be purchased in your late 50's or early 60's. In this range the cost is quite affordable and your health is probably still pretty good. The premiums are based on your age, health, and the type of plan that you purchase.
 

LTC Insurance Benefit

Considerations

 

When purchasing LTC Insurance you must make three main decisions:

 Daily Benefit - the amount of money you will receive from the insurance company on a daily basis for your care. You usually can select between $50 and $250 per day. Find out what the current cost of care is in your area and it will help you make the decision as to what daily benefit you want. (also see inflation protection below).
 

Benefit Period - the length of time you will receive payments from the insurance company once you need care. You usually can select a specific number of years (2,3,4,5,) or lifetime plans are also available. The average length of stay in a nursing home is 2 1/2 to 3 years. Note: A three year plan will be less expensive than a lifetime plan.

 Elimination Period (deductible) - the number of days that you will be responsible for paying for your care before the insurance begins to pay. This works like most insurance deductibles except it is stated in a number of days instead of dollars. Most plans have a variety of options like 0 days, 20 days, 60 days, or 100 days. Be sure to check if this deductible is once in a lifetime or if it can repeat.

 Also, there are three optional decisions that can be added to your plan.:

 Inflation Protection - this ties back to your daily benefit and allows it to grow on an annual basis to help keep your plan in step with inflation. It is built into your original premium and therefore will increase your annual premium. You may have choices of 5% simple or 5% compounded. You do not have to add this to your plan - but it is certainly recommended if you are younger when you buy your policy.

 Home Health Care Coverage - some policies will also give you the option of receiving insurance benefits in your own home. This options will allow you greater choice as to where your care can be paid for by the insurance. It may cover community care like Adult Day Care Centers and Assisted Living Facilities as well as care in the home. This option will increase your premium.
 

Nonforfeiture - this option provides some form of paid-up benefit if the policy should lapse. This option increases your base premium.
 

I hope this will give you some direction when comparing LTC policies. Always look for a strong and reputable company and also make sure your agent is knowledgeable about long-term care issues as well. Shop around and educate yourself and use your best judgment when selecting a plan. Look for plans that are Tax Qualified.