Personal care. Traditionally, long-term care for disabled elderly people in this country has been provided at home by unpaid family members. Usually this consists of custodial care-helping the person dress, eat, bathe and so on, with no or limited skilled medical care from professionals. However, fewer families are in a position to provide this personal care as people live longer, families scatter more geographically and more family members work. Consequently, the demand is growing for more professional-and expensive-care, either at home or in care facilities.

Personal income and savings. Individuals pay roughly one third of the nation's total long-term care costs, such as nursing homes bills, out of their pockets. Costs can be extraordinarily high. According to the Alzheimer's Association, the average lifetime cost to care for a person with Alzheimer's is $175,000, and one out of three families who care for a seriously ill family member deplete their savings.

Life Insurance. Increasingly, people are turing to their life insurance to help pay for their longterm care costs. First, they may be able to borrow from the policy's cash value. Some policies pay out an "accelerated benefit," which may run as high as 90 or 95 percent of the policy's death benefit. However, the insured usually must have a life expectancy of only 6 to 12 months.

Some people sell their policy to a third party, called a viatical settlement. They are paid a portion of the face value, say 50 percent or 80 percent, depending on their life expectancy. People already on Medicaid may want to consider a "viatical loan" since it won't disqualify their Medicaid support.

A newer option is to have a life insurance policy that pays out a long-term care benefit, say two percent of the death benefit each month, until the policy's face value is exhausted. This might work for short periods of time, but many experts argue that stand-a-lone long-term care policies are more comprehensive and more cost effective.

Medicare and Medigap. This federal health care program for retirees covers only a portion of the costs for up to 100 days of skilled nursing care following a hospitalization, and only then if the patient is capable of recovering. Most long-term care is custodial, not skilled. Medicare covers less than ten percent of the nation's total nursing home costs. Supplemental Medicare insurance "medigap"-will pay a portion of skilled nursing care, but not custodial care.

Medicaid. This federal/state program is designed to pay for medical care for the poor. Unfortunately the majority of nursing home residents exhaust their savings and end up on Medicaid. In fact, Medicaid pays roughly l 0 percent of the cost of nursing home care in this country. To qualify for Medicaid assistance, the applicant must generally earn less than $1,500 a month and have assets of less than $2,000, excluding such assets as a home and a car.

Long term care insurance. Most long-term care insurance, which pays out a daily benefit (usually tax free) for a defined or unlimited period of time, is bought privately. More and more employers are offering group plans, but evaluate them carefully. They may be less comprehensive and cost just as much as private coverage.

Experts debate the quality of long-term care policies and who should or should not buy one. However, proponents point out that a lifetime of premiums, regardless of what age you buy a policy, usually amounts to no more than a single year's stay in a nursing home. Before purchasing a policy, talk with your Certified Financial Planner professional to determine whether a policy is right for you or a loved one such as a parent.

March -30- 1999