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Is Long-Term Care Insurance Right For Your Family?

MINNEAPOLIS (WCCO) -- It's a topic a lot of people don't like to talk about: How are you planning to pay for long-term nursing care for an elderly parent, or even yourself?

Surveys show seven out of ten people over the age of 65 will need it, and the costs can be staggering: between $5,000 and $10,000 a month.

That means the average nursing home stay can easily cost more than $300,000, and it's not covered by health insurance or Medicare.

Edith Anderson of East Bethel, Minnesota, died last year at the age of 94 -- a fall had sent her to the hospital. Months after her death her daughter Kay is still getting bills.

"It is a nightmare," Kay Anderson said. "I am looking at bills coming through that Medicare is denying."

Kay Anderson says she has no idea what her final out of pocket costs will be for her mom's care.

"It hits you like a brick that, first of all, you have come up with $6,000 dollars up front," she said.

Anderson, who is is 56 and single, now worries how she'll pay for her own care.

"I am exploring the options of long-term care insurance, because I don't see any other way for myself to be taken care of," she said

Less than 8 percent of Americans have long-term care insurance policies. What most people don't know is that their private insurance and even government programs, like Medicare, don't pick up the tab for long-term care, whether it's for a chronic condition like dementia, or for someone who can no longer care for themselves.

An industry association estimates a single, 55-year-old, healthy person would pay an average of $2,000 a year for a policy that would provide a benefit of $150 dollars a day for long-term care -- up to $164,000. A 3 percent cost of living index is built in.

Mary Frances Price is an elder care attorney who conducts seminars on how to pay for long-term care. She says long-term care insurance is not for everyone, but the lowest premiums can come from large employers.

"If I have clients that have an opportunity to purchase into a corporate-sponsored plan, I strongly encourage them to investigate," Price said.

Price advises clients who are buying policies on their own to be wary of high-end sales pitches.

"Buy a policy that spreads some of the risk, but don't feel you have to buy a policy that covers at the highest level," she said.

Surveys show consumers have shied away from long-term care insurance, in part because many don't want to buy a policy they think they may never use. In the past few years, insurance companies have responded with new products.

"They do have some plans that accumulate some cash value, that have an annuity component," Price said.

As long-term care insurance policies change, more consumers are expected to take a look -- especially at a time when laws are changing. A big change in Minnesota state law came in 2009 when the legislature passed a law -- without a single hearing -- that allows all of a surviving spouse's assets to be seized to reimburse the state for their husband or wife's care.

"So we went from being able to protect half of the estate and pass a legacy on," Price said. "Now that's gone, and 100 percent of it can be used."

Price added that some couples' estates are getting wiped out.

That law is even leading some couples to think twice about marrying -- especially later in life.

"They are saying, 'If I marry this person and they get sick, then my entire estate might have to be spent on the care for that person, so I think I'll cohabitate and not get married,'" Price said.

According to Price, you can get stuck with huge legal bills on top of nursing home costs if you don't have a will, a health care directive and a power of attorney.

"You are having to go to court to get permission to help a spouse," Price said. "It's the type of planning where you're going to spend hundreds to thousands to save tens to hundreds of thousands."

Price says another mistake people make is to put off planning.

"Begin the conversation now when you are young and healthy enough to make good decisions," she said. "When we work with families who have been reluctant to look at the difficulties of this type of potential scenario, almost inevitably it becomes a crisis at some point, and that is far more costly, both emotionally and financially."

And that's something Kay Anderson understands.

"I feel like I am in a post-traumatic stress place trying to recover," she said. "It's really tough. As a caregiver, you don't realize the amount of stress you're under."

Recent changes in federal law have also made it much more difficult for the elderly to give their assets to loved ones and qualify for state assistance. In 2006, the government look-back period to recover assets for reimbursement increased from three to five years.

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