Preparing for long-term care.

Shortly before pediatrician/author Benjamin Spock died, it became publicly known that he was in severe financial difficulty due to the high cost of caring for the ailing 94-year-old man. His home care bills were running $16,000 a month, little of which was covered by Medicare and private insurance. Spock's plight illustrated the fact that the high cost of home health care and nursing home care quickly can drain the financial resources of even people who are relatively welloff. Numerous surveys show that consumers lack knowledge or hold misconceptions about long-term-care (LTC) insurance, which can help defray these high expenses. The Institute of Certified Financial Planners, Denver, Colo., offers the following test to see what you know about this vital subject:

1. Most people will end up in a nursing home at some point in their lives.

   [] True [] False

2. Most people don't need to buy LTC insurance because Medicare and Medicaid pay for nursing home care or home health care,

   [] True [] False

3. Average nursing home costs run how much a year in this country?

   [] A. $20,000 [] B. $40,000 [] C. $60,000 [] D. $100,00

4. The best age at which to buy LTC insurance is:

   [] A. 50 [] B. 60 [] C. 70 [] D. 80

5. What percentage of the population owns LTC insurance?

   [] A. 1 [] B. 5 [] C. 15 [] D. 25

6. Premiums paid for long-term-care insurance are tax-deductible.

   [] True [] False

7. Benefits paid out by a long-term-care policy are not subject to income tax.

   [] True [] False

8. States are required by law to try to recover assets from the estates of Medicaid recipients,

   [] True [] False

   ANSWERS

1. False. Estimates vary, but, according to the Scripps Gerontology Center in Ohio, people between the ages of 75 and 90 have less than a 20% chance of requiring long-term care. However, most people never need their homeowner's insurance either, yet few go without it. If you have sufficient financial resources to protect, consider it.

2. False. Medicare pays for less than 10% of nursing home costs. Medicaid will pay for nursing home care or home health care, but only if you essentially are broke. LTC insurance is most appropriate for middle-income families with assets to protect. The wealthy can afford to pay the costs, and the poor can depend on Medicaid.

3. B. Average costs are more than $40,000, but run $60,000 or more in certain parts of the country. Some nursing homes can cost $100,000 a year. Average nursing home costs are expected to double by the...