Mellody Hobson: Preparing for Long-Term Care

Jan. 12, 2004 — -- Millions of Americans are finding themselves stuck in the difficult position of caring for an elderly parent while also trying to cover the costs of college education for children and saving for retirement. These individuals are commonly referred to as members of the "sandwich generation."

According to the MetLife Mature Market Institute study, nearly 25 percent of all households have at least one adult who has provided care for an elderly person in the last year. Interestingly, 33 percent of working women reduced their work hours to care for a chronically ill relative; 29 percent passed up job promotion training or an assignment; 16 percent quit their jobs; and 13 percent retired early. In fact, the survey revealed, caregivers helped with their elderly relative's expenses for two to six years, spending a total of $19,525 of their own money.

More than 78 million Americans will be over 65 by 2025. And with age often comes a need for dependent care and assistance. According to Medicare, 7 million people over the age of 65 required long-term care in 2004. This year, the number is expected to rise to 9 million, and by 2020, the number of people projected to need long-term care is 12 million.

The cost of this care is exorbitant. In fact, according to a survey by the institute, the average cost for a nursing home is $66,153 a year. With costs projected only to rise, here are some critical issues and possible solutions to consider:

The first line of defense for medical expenses for seniors is Medicare, which is health insurance coverage provided by the federal government to most people who are 65 years and older, as well as some younger people with disabilities or kidney failure. As it relates to long-term care, Medicare covers certain expenses including those associated with limited stays in nursing homes, home health agency care and hospice care. Although Medicare will not pay for stays in assisted-living facilities, it may cover the costs of some services -- including home health care and doctors' visits -- provided in these facilities.

That said, about 50 percent of people in nursing homes rely on personal wealth to pay for their long-term care, according to Medicare. An additional resource to keep in mind is Medicaid. Jointly funded by the federal and state governments, Medicaid provides health insurance to the poor as well as those who are 65 years and older, disabled or eligible for other government aid. Medicaid offers Medicare beneficiaries assistance with their out-of-pocket expenses and also covers the costs of prescription drugs, eyeglasses and hearing aids as well as other services not covered by Medicare. A key benefit of Medicaid is that nursing home benefits outlast those offered by Medicare which always end after the first 100 days in each benefit period.