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Long-term care planning a multi-generational issue

Like almost every aspect of the health care industry, the cost of long-term care is on the rise. And the costs of nursing home services in San Diego County are well above the national average.

According to a new survey from MetLife (NYSE: MET), the average cost for a private room in a local nursing home now runs $217 a day, or $79,205 a year. That is higher than the national average of $192 a day and $70,080 a year. "The cost of long-term care continues to rise," said Sandra Timmermann, director of the MetLife Mature Market Institute. "As people prepare for their retirement and assess their asset and income requirements, it is essential that they plan for the possibility that they will need assistance with day-to-day living. Unanticipated long-term care costs can derail an individual's financial plan."

The cost of care can quickly consume the meager savings of most baby boomers. The survey found that the average of stay in a nursing home is 2.4 years, which makes the average cost around $168,192.

The demographic outlook for the U.S. population paints a picture of growing demand for long-term care. For instance, in 1940, a 65-year-old woman could expect to live an additional 14.7 years. By 2000 a 65-year-old woman had a life expectancy of 19.5 years. And in 2040 the number rises to an additional 22 years.

Even more dramatic, half of the babies born in 2004 will live to reach the age of 100. As a result, planning for long-term care is becoming a multigenerational issue.

"Most studies of late have focused on whether individuals have enough long-term care protection for themselves, while ignoring the role of the family in this decision," said Susan Morisato, senior vice president at Bankers Life and Casualty Co.

The company released the results of a survey that found 42 percent of adult Americans believe their parents have long-term care insurance, while only 31 percent of senior Americans polled said they currently have such an insurance policy.

"These findings raise the important questions of emotional issues, whether adult children are talking with their parents about plans for long-term care, and if older Americans know what long-term care policies are," said Morisato.

A lack of knowledge about long-term care and insurance certainly can't be blamed on a lack of information. Every insurance and financial planning company is realizing that a lot of money is to be made by selling long-term care policies to individuals and families in need. And, as is often the case with most insurance products, the potential for abusive sales practices is evident.

"Very few people in this country, including the financial and care advisers we depend on so heavily, understand the continuum of long-term care," said Robert Pearson, president of CareQuest University, an education and training program. "Most only understand their own piece of the long-term care industry, and that's one of the reasons that this long-term care crisis has been slow in developing solutions."

Few consumers are aware that they will be required to spend down the bulk of their retirement savings before becoming eligible for government assistance in paying for long-term care. By providing an insurance product that will pay those increasing costs, retirees will be able to keep their nest eggs intact.

And, as families deal with the multitude of insurance options that address long-term care, they must also evaluate the options for receiving the living assistance.

"As the boomers reach age 65, their retirement will not resemble that of their parents or grandparents," said Sandra Timmermann of MetLife. "We are beginning to see trends that could signal major changes for aging baby boomers and their retirement living plans."

The population of nursing homes is rising faster than the availability of accommodations. Approximately 1.6 million people reside in 18,000 nursing homes in the United States, according to the National Center for Health Statistics.

More than 1.3 million patients received home health care services from 7,200 agencies in 2000 with more than half receiving help with at least one activity of daily living.

Ask any family that has opted to commit a loved one to nursing home care and they will say quality of care is the prime concern. To that end, the California Legislature approved the Nursing Home Quality Care Act.

Last week Gov. Arnold Schwarzenegger signed into effect the law, which brings millions of dollars in federal support to the state and holds nursing homes accountable for quality care.


Chamberlin's financial analysis column appears each Monday in The Daily Transcript. Chamberlin also reports daily on stocks and local business on NBC 7/39 and on "Money In The Morning" on KOGO 600 AM.

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