The long-term care headache

Posted on January 24, 2012

First, the good news: Americans aged 50+ increasingly recognize the need for long-term care. Now the bad news: They don’t know how they’ll pay for it. By one estimate, home health care costs on average about $21/hour, though if you’re in New York, Los Angeles or most other urban areas, you’ll pay a lot more for quality care.

The Wall Street Journal’s Glenn Ruffenach picks up on long-term care costs in a spot-on column in the January Smart Money. For accident victims, this is an especially important healthcare issue, as problems stemming from physical injuries often magnify over time.

Ruffenach writes in part:

Yes, you can try to self-insure, but many nest eggs will be hard-pressed to finance retirement alone, much less long-term care. You might think Medicare will be your safety net, but the program only covers short-term stays tied to illness or injury -- not assisted living or nursing-home care. And the Class Act, the federal program designed to offer long-term-care coverage directly to the public, was scuttled last fall.

Another problem for accident victims: Disabilities from the accident may raise the cost of your long-term care premium or reduce its availability.*
California labor union attorney Michael Rott, author of The Employer’s Workers Compensation Handbook, addressed these issues last April at NSSTA’s Annual Meeting. For anyone facing a accident settlement, Rott’s comments provide an answer to the financing question that Smart Money’s Ruffenach raises:

In most [of my workers’ compensation] cases, the part of the settlement needed to fund future attendant care and housekeeping issues actually exceeds the value of the permanent disability. This makes it a very, very ripe area for a structured settlement. I would absolutely counsel attorneys to roll in the attendant care into the settlement.

His rationale? The financial benefits that the Internal Revenue Code provides for beneficiaries of a structured settlement. “If the spouse is paid outside of the structured settlement, then they’re probably going to be taxed on it,” he said. “If it becomes part of the structure they’re probably not going to be taxed.”

For an excerpt of Mr. Rott's presentation, see below.