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Plan Now for Long-term Care

Medicare programs will not cover aging baby boomers, planning now only way to prepare.

* This is part one of a two-part series, the next article will compare long term care providers and what to look for in a plan.

As the baby boomer generation ages it is estimated that 77 million people are approaching retirement age — many unaware that federally funded Medicare programs will not cover their long-term needs.

"People need to be responsible for themselves," said Penny Gilbert, physical therapist and long term care planner. "People think they can rely on the government and the government can't do it."

Gilbert said she and her physical therapy partner, Elizabeth Stein, became agents for Long Term Care Financial Partners — a nationwide agent-owned brokerage firm — after working with aging clients in therapy who were not properly insured.

"People don't want to accept the idea that they may need long term care one day," she said. "I think that's the biggest challenge."

To help state residents become further informed on the importance of long term care planning, Gov. Mark Warner (D) began 2005 by promoting an "Own Your Future" campaign — developed in conjunction with the U.S. Department of Health and Human Services (USHHS).

Through the campaign — a pilot program in five states including Virginia, Idaho, Arkansas, Nevada, New Jersey — Warner will send a letter to roughly 650,000 households with people 50 to 70 years old informing them to plan now for the impact of aging.

In his kick-off speech, Warner reported an estimated one-in-four Virginians will be over the age of 60 by the year 2030 — emphasizing the need for baby boomers to plan now.

"The misconception is that Medicare will take care of long term care needs," said E. Janet Riddick, state department of aging. "Medicare might pay for a rehabilitation stay, but that's with a limit of 100 days, it's not a long term solution."

Riddick added "a lot of working aged adults don't have a good concept of Medicare and Medicaid," saying Medicare will not pay for long term care except in very extreme cases.

"A lot of people have not become educated on [long term care] or really given any thought or direction to this until they've reached a need," she said.

She explained Medicare was created to provide basic health services for elderly or people with disabilities 18 years or older and Medicaid was developed to assist low-income individuals.

DAVID HILLELSOHN, brokerage manager The Hasslett Management Group, Inc. — long term care insurance provider — said long term care insurance should hold the importance that life, car and homeowners insurance all hold.

"The reason people carry insurance is clear," he said, "if you need the benefits, you'll be pleased to know the loss is covered."

With the aging baby boomer generation, Hillelsohn said the shift of financial burden for long term coverage will fall on the private sector because the current tax incentives are not enough to spark people to begin planning ahead.

"The pilot is here to force people to think about long term care," he said about the campaign. "Just because [long term care] is out there, it's not enough if you don't know about it."

Currently, MetLife reports that 6.4 million people over the age of 65 in the United States need long-term care.

The average cost of long term care in the U.S. across all service categories — nursing homes, assisted living facilities, home care — was $72,240 for 2004, according to Genworth Financial, an insurance holding company.

Genworth also reported the 2004 daily room rates for a private nursing home in Virginia cost $150.64, or an annual average cost of $54,984.

"I think the case and point here is that Medicaid is paying for two-thirds of nursing home care in the country," Riddick said about the financial impact the baby boomer generation will have if they do not plan.

Hillelsohn said one reason people do not plan when they are younger — 30s and 40s — is because they think more about disability coverage. It's not until they retire that they consider long term coverage.

"While disability is a concern today, long term care is a concern today too," he said. "People need to think about the transition from disability to long term care. In most cases, the catalyst of thinking about long term care is taking care of people around you [who need care]."

IT IS IN THE AGING population's best interest to look into long term care insurance when they are younger because it is cheaper, Riddick said.

"The rate is tied directly to the age you are when you purchase it," she said. "Someone who is 10 to 15 years before retirement, that's a bit on the late side — but better late than never."

Gilbert reiterated the importance to plan early because those who qualify for Medicaid will not receive choices in coverage or in their placement in long term care facilities.

"A lot of people think, 'I don't need [long term care insurance], I have plenty of money, I can self-insure, I'm young and it's too complicated,'" she said about why people don't plan. "They need to spend time with a specialist and ask them questions."

In addition to speaking with a long term care specialist, those contacted by Warner will have the option to receive a "tool kit" complete with a 28-page "Own Your Future" brochure.

Residents can also call the Eldercare Locator at 1-800-677-1116 to find a local area agency on aging to answer further questions.

"It's becoming more and more true," said Riddick, "people are living longer and longer and the average person will have the need for long term care for a longer amount of time."