By Lisa Caddell-business columnist/Rocky Mount Telegram
Monday, August 29, 2005
The following two stories are fictional and have been written to illustrate the possible advantages
of having a good long term care policy when you need care in the future.
You are a 60-year-old, intelligent male contemplating early retirement. Having always been one to
plan for the future, you are considering the financial risks you may face upon reaching the
statistically expected age of 81. You realize that the possibility exists that you may live even
longer than expected since your parents did, and you are in very good health, playing golf and
tennis regularly. Right now, it is difficult to imagine that someone else may have to take care of
Since it is difficult to ignore the fact that so many people need care when they get old, you
consider how you might pay for your own care and how it might affect your family. After talking to
a few of your friends and requesting literature about long term care, you conclude that long-term
care insurance is too expensive. You are not willing to spend, or invest, the few dollars a year it
would take to buy a plan for a nursing home or the managed home care you might need. Thus,
you decide to take your chances and save the money.
Time went by, and sure enough, your gamble paid off. You died suddenly of a massive heart
attack at age 80. The money that you would have paid premiums with was saved, instead, and
your heirs had an additional sum of money plus interest to distribute among themselves.
However, when the inheritance was divided among your loved ones, the extra money you had
saved really didn’t make a significant difference in anyone’s life.
The following story has the same beginning as the first; you did not purchase long term care
insurance, and you faithfully deposited the few thousand dollars per year in a savings account.
This time, upon reaching the ripe old age of 80, you did not die suddenly. No, this time you
suffered a debilitating stroke or you developed Alzheimer’s Disease. Your family attempted to
keep you at home for a while, but your spouse was no longer able to handle the household
chores by herself. The children were only able to help on the weekends so the family tried to hire
outside help. They discovered that it is very difficult to locate good, honest caregivers. None of
the family members were experienced in home health care, and everyone felt inadequate and
guilty that they could not do more. No one ever dreamed it would come to this.
Finally, your family came to the conclusion that there was no other alternative but to locate a
good nursing home and apply for residency. By that time nursing home costs had more than
doubled. Nursing homes that were charging $50,000 a year for room and board in 2005 were
charging over $98,000 a year in 2025. The money plus interest you saved by not purchasing LTC
insurance paled in comparison to the possible cost of your care.
The money you had saved was gone is four months and some of your assets had to be liquidated
to pay for the nursing home and the other services you needed. Because you were physically
strong and iron willed, your nursing home stay extended well beyond the average. You finally
gave up and died at age 86 after spending five years in the nursing home. The $500,000 it took to
pay for your care that lasted five years made a significant difference in a lot of lives. Not only was
there no inheritance left to divide, but your spouse who was still living and struggling to stay at
home, herself, was in danger of a nursing home stay.
The children had long since forgotten about any inheritance and only hoped that mom would not
be forced into a substandard facility. Since there was no money left, the children knew from
having had the experience with your situation that finding a place to stay when there isn’t enough
money to pay the full bill reduced their mother’s options for care significantly. Yes, you saved a
few thousand dollars and change by not purchasing long term care insurance, but the
consequences were devastating and far-reaching, even beyond your grave.
When it comes to me and my family, I would rather waste the money on long-term care insurance
than take the risk of having to pay for long-term care out of pocket. Just recently, my 93-year-old
grandmother made a comment to me while we were visiting her. She said, “Lisa, I know I am
going to spend all that money on this insurance, and I’ll never get a dime back.” I responded, ” I
sure hope so, Grandma.”
The story of “spend down” is common place. Nationwide, roughly 70 percent of those living in
nursing homes are impoverished and receive Medicaid benefits. Is the cost of long-term care a
risk you want to shoulder alone? You have insured your other major risks, like your home, your
automobile and your health insurance, so why not long term care? Can you think of anything,
other than the cost of long-term care, that could involuntarily wipe out your life savings?
Lisa Caddell is a senior long-term care specialist in Rocky Mount.