As Americans age, need for long-term care looms

A new U.S. Census Bureau report predicts that A new U.S. Census Bureau report predicts that roughly one in five Americans will be 65 or older by 2050, compared with just 13 percent in 2010 and less than 10 percent in 1970. Photo Credit: iStock

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Americans are getting older. A new U.S. Census Bureau report predicts that roughly one in five Americans (about 21 percent) will be 65 or older by 2050, compared with just 13 percent in 2010 and less than 10 percent in 1970.

Taking a longer view, the numbers are startling.

According to the CBS-TV "60 Minutes" segment, "Living to 90 and Beyond" that aired in May -- nwsdy.li/live90 -- "Since the start of the 20th century, we have increased life expectancy in this country by a remarkable 30 years, from just 49 in 1900, to almost 79 today. . . . Men and women above the age of 90 are now the fastest-growing segment of the U.S. population."

Of course, the key is to live longer with good health, and that goal is a tough one to achieve. According to the 2014 Medicare & You, the national Medicare handbook -- nwsdy.li/medicarehandbook -- at least 70 percent of people over 65 years old will need long-term care services and support at some point.

Unfortunately, many do not realize that Medicare and most health insurance plans, including Medicare supplement insurance (Medigap) policies, don't pay for this type of care, sometimes called custodial care.

Only those with limited resources qualify for coverage through Medicaid, which is a joint federal and state program that helps pay for certain health services. If you qualify for Medicaid, you may be able to get government assistance for nursing-home care or other health care costs.

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And those costs are breathtaking. Genworth Financial's Cost of Care Survey for 2014 -- nwsdy.li/LTCcostofcare -- shows that prices for care have steadily increased, though the cost of facility-based providers has grown at a much greater rate than that for home care.

In 2014, the national median cost for a private room in a nursing home was $87,600 annually (prices vary widely across the country), which represents a 4.19 percent compound annual growth rate over the past five years -- that's more than twice the annual rate of inflation during the same period. (Note: Bunking up doesn't save as much as you might think: The cost of a semiprivate room is a whopping $77,380.)

If you don't need a facility, care is more affordable. The national hourly median rate for a licensed home health aide rose by just 1.32 percent annually during the past 5 years, to $20. The slower rate of inflation is attributed to increased competition among agencies and the wider availability of unskilled workers.

Everyone has heard stories about folks who plow through all of their savings due to an extended illness, but the cost of protecting against that potential liability can be steep. According to the American Association for Long-Term Care Insurance, a typical long-term care policy for a 55-year-old couple costs about $4,000 and about 15 percent of people in their 50s get declined for long-term care insurance.

Who needs long-term care insurance? Generally speaking, those who have a total net worth, including a house, between $300,000 and $1.5 million may want to consider purchasing some baseline coverage. (Those below $300,000 can rely on Medicaid, while those above $1.5 million can self-insure.) Couples are especially vulnerable, because a sick spouse can eat into assets that would dramatically change the healthy spouse's life in the future.

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I am often asked about specific companies that provide long-term care insurance coverage. Many insurers no longer offer this product because it is too difficult to predict how many people will need long-term care and what the cost of that care might be.

Unfortunately, the more insurance companies that exit the LTC business, the fewer options there are for consumers. Some of the highly rated companies that are still committed to offering long-term care insurance include Genworth, John Hancock, Mutual of Omaha, MassMutual, New York Life and Northwestern Mutual.

Jill Schlesinger, a certified financial planner, is a CBS News business analyst. She welcomes emailed comments and questions.

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