Sources of Long-Term Care | GROUP LONG-TERM CARE INSURANCE

There are several sources other than insurance that are available for providing long-term care. However, there are drawbacks associated with each source.

One source is to rely on personal savings. Unless a person has substantial resources, however, this approach may force an individual and his or her dependents into poverty. It may also mean that the financial objective of leaving assets to heirs will not be met.

A second source is to rely on welfare. The Medicaid program in most states will provide benefits, which usually include nursing home care, to the "medically needy." However, a person is not eligible unless he or she is either poor or has exhausted most other assets (including those of a spouse). There is also often a social stigma associated with the acceptance of welfare.

Life-care facilities are growing in popularity as a source of meeting long-term care needs. With a life-care facility, residents pay an "entrance fee" that allows them to occupy a dwelling unit but usually does not give them actual ownership rights. The entrance fee may or may not be refundable if the resident leaves the facility voluntarily or dies. As a general rule, the greater the refund is, the higher the entrance fee will be. Residents pay a monthly fee that includes meals, some housecleaning services, and varying degrees of health care. If a person needs long-term care, he or she must give up the independent living unit and move to the assisted-living or nursing home portion of the facility, but the monthly fee normally remains the same. The disadvantages of this option are that the cost of a life-care facility is beyond the reach of many persons, and a resident must be in reasonably good health and able to live independently at the time the facility is entered. Therefore the decision to use a life-care facility must be made in advance of the need for long-term care. Once such care is needed or is imminent, this approach is no longer viable.

A few insurers now include long-term care benefits in some cash-value life insurance policies. Essentially, an insured can begin to use this accelerated benefit while still living. For example, if the insured is in a nursing home, he or she might receive a benefit equal to 25 percent or 50 percent of the policy face. However, any benefit reduces the future death benefit payable to heirs.