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Long-Term Care Services: Why It Pays to Shop

This is the third in my series of posts on the threat of high long-term care services. The first two posts provided an overview of the issues and estimated the risks that you'll need long-term care over your lifetime. Here I'll discuss the wide range of alternatives and costs for long-term care services.

I'll start with a personal story. A few years ago, my wife and I investigated alternatives for providing long-term care to her mother. We were surprised to find a wide range of costs and quality of service. While it took several days to shop for her care, it was definitely time well spent. We moved her to a residential care facility for the elderly (RCFE) close by us; it was over $1,000 per month less expensive than the assisted living facility she was previously living in, and it offered more personalized care.

This story illustrates that it's important that you shop for the most appropriate care at the best cost, whether you're paying for these services from your own resources or from insurance benefits.

Here are common alternatives for obtaining long-term care, categorized by cost:

  • No or low costs: Your spouse, family or friends pitch in and take care of you (if they're willing and able). The type of assistance you'd need and the time involved varies widely, from minutes to hours each day. Note that if friends or family pitch in to help, it's not necessarily free or even low-cost. Often spouses and other care-givers must quit their jobs or reduce their hours to free up time for care-giving.
  • Low to medium costs: Home health care, where personal care assistants, companions or home health aides come periodically to your home to help you as you need. According to Genworth's Cost of Care Survey, the national median hourly rate in 2010 is $18 for licensed homemaker services and $19 for licensed home health aide services. Costs can vary widely by region, as shown by Genworth's survey. In Arkansas, for instance, the median hourly rate for licensed homemaker services is $15, in Florida, $17, and in New York, the cost is $20 an hour.
  • Medium costs: Adult day care or a live-in caregiver. Adult day care can work well for situations where 24/7 care isn't needed or if household members have full-time jobs and aren't able to be there when necessary. Genworth's survey shows the median daily rate for such an adult day care facility is $60. A live-in caregiver can work if you have a spare bedroom or two and don't mind someone living with you; you can offer room and board and a modest salary. Note that this last approach requires special attention to taxes on the caregiver's salary. The salary typically starts at $2,000 per month and goes up from there, depending on the arrangements for room and board and the qualifications of the caregiver.
  • High costs: Assisted living facilities, residential care facilities for the elderly, or nursing homes. Genworth's survey shows that median monthly rate is $3,185 for assisted living facilities. Again, costs depend on where one resides. In New Jersey, Genworth puts the price of an assisted living facility at no less than $4,775 per month, whereas in Kentucky the price is $2,557 per month. The median daily cost for a semi-private room in a nursing home is $185. Multiply this rate by 365 days, and you'll get close to the $70,000 per year figure quoted in last week's post. At these rates, it won't take long to wipe out your retirement savings. If you have the funds or long-term care insurance, however, these are options to consider.
It's important to keep the terminology straight. Nursing homes are institutions with sick "patients" who need focused medical attention, 24 hours a day. Assisted living facilities have "residents" who need help with daily living activities and with medical care, but not 24/7. Residential care facilities for the elderly (RCFEs) are licensed houses in regular neighborhoods that are home to a handful of senior citizens -- typically up to six -- with a staff that takes care of them. RCFEs generally have lower costs than institutional nursing homes and assisted living facilities, with the potential for a living situation that feels more like a home

Some institutions combine features of different facilities: You may start off in the assisted living wing, for example, and then if your health declines, move on to a wing that's more like a nursing home.

It commonly happens that you start with the low-cost alternatives, and then as your condition deteriorates you need the higher-cost alternatives. Like anything else, there are good and bad examples of each type of long-term care provider, so you need to do your shopping carefully.

My next two posts on long-term care will cover the strategies to address the financial threat, and will discuss the pros and cons of these strategies. I'll also include tips for buying long-term insurance.

Back to my mother-in-law: She eventually exhausted her assets, and she didn't have long-term care insurance. At that point, my wife and I gladly pitched in. By being resourceful and persistent in our shopping, we were able to spend our dollars wisely to make her final years as comfortable and happy as possible. This also illustrates that regardless of the financial preparations that you've made, when you reach your later years, you'll need a younger advocate to look out for you and help implement your plans.

My wife and are also heeding the warning that my mother-in-law provided on the need to improve our lifestyle so that we reduce the odds of needing long-term care, but also to make preparations in case we eventually will need this care. We won't hide our heads in the sand.

More on CBS MoneyWatch
Should You Buy Long-Term Care Insurance?
Long-Term Care: What Are the Real Risks?