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ACLI Says Boomers’ Nursing Home Costs to Quadruple in 30 Years By Chuck Jones If and when the time comes for you or your spouse to go into a nursing home the annual bill will be four times as great in 2030 as today, and don’t expect your children to help because fewer will be able to, reports a new study by the American Council of Life Insurers. While long-term care costs are expected to climb a steady 5% per year in that time, the study says Americans are going to find it harder to "age in place." The ACLI says nursing home care, which currently costs an average $44,100 per year, will run $190,600 annually by 2030, more than quadrupling today's rates. This is an annualized compounded increase of 4.9%. Adult day care, now an average $50 per day, will by then cost $220 daily, or $56,100 per year. Home assistance that now costs an average $61 per visit is projected to rise to $260 per visit by 2030. The cost of long-term care "illustrates the importance of taking personal responsibility for your financial future and your future long-term, care needs,” says Barbara Stucki, who holds a doctorate in anthropology and is the author of the study. "Middle-income baby boomers will find that to successfully age 'in place'-that is in their homes or in the home-like setting of an assisted-living facility-they will have to use their retirement savings to pay for services. Without long-term care insurance, many will face potentially catastrophic costs that could lead to impoverishment and the need to use Medicaid-funded nursing home care.” The ACLI also says that when members of the baby boom generation retire (some will reach the age of 59 ˝ before 2010), they will receive less family care-giving support. Boomers typically have smaller families than previous generations, and one in five women in the cohort is childless. The high incidence of divorce is also likely to be a problem because divorced parents are less likely to receive care-giving assistance from adult children than widowed parents, the study says. Divorces also consume current income and savings and cause the division of retirement plan assets into smaller parts. The report says Americans can have a substantial income and still qualify for Medicaid, but protecting private assets is not the best reason for not planning to have the government pay for your nursing home care. The quality of the care is the reason to buy LTC insurance, says Stephen A. Moses, president of the Center for Long-term Care Financing in Woodinville, Washington. “There are plenty of ways to hide and protect assets and still have the government pay for your care,” Moses says. "But what you have to really look at is the quality of that care. If you go on Medicaid, you're going to rot in a nursing home because that’s all they're going to pay for. But if you want the option of receiving home health care or care in a non-institutional setting, you're going to have to pay for it privately. And the smartest way to do that is with long-term care insurance." The option to receive home health care is widening as more non-institutional patient services become available in the home, he says. But those services come with a cost. “Aging 'in place' is a, powerful concept," Moses says. “It’s attractive to most people. If you ask people, ‘Do you want to go to a nursing home or do you want to stay at home?’ they are going to say they want to stay at home. But you have to have a plan that will pay for that kind of care. Medicaid worst. So the issue is about more than just protecting assets." If the cost of nursing home care and home health care is going to quadruple over the next 30 years-a compound annual growth rate of almost 5%-LTC insurance policies are going to have to keep up with that inflation', says Victor Evans, an independent agent in Wichita, Kansas, who specializes in LTC insurance. "I don’t think its alarmist thinking to say the cost of care is going to go up as high as they say it will,” Evans says. "That's why it's smart to have inflation protection, as a rider or as part of standard coverage” A 5% inflation rider is probably prudent, he says, even though medical inflation often runs twice as high. "Some contracts offer 5% simple inflation or 5% compound. It’s always better to get compound because it’ll stand a better chance at actually keeping up with rising costs,” which the ACLI projects at just around 5%. “And the difference between simple and compound inflation protection is only pennies in premium,” he says.
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