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Paying for Long-Term Care

Learn the basics about who covers what

En español | You're not the only one worried about the skyrocketing costs of long-term care or confused by all the rules about insurance coverage. AARP surveys report that many people mistakenly believe Medicare will cover all the care they'll need as they age. Others think they already have coverage through different types of insurance, only to find out, too late, that they don't. As a result, they may watch a lifetime of savings vanish to pay bills.

See also: Boomer women face retirement crisis.

Most people finance long-term care through a patchwork of options — savings, investments and insurance, as well as government or community services. Here's what you need to know to make your savings last as long as you do:

Medicare pays for a short stay in a nursing home under very strict conditions. In general, you need to be receiving medically related skilled care after being in the hospital for three days or more. Restrictions also apply if you want Medicare to cover services you receive at home. You must need skilled care, such as care provided by a nurse or therapist, and your doctor must order it from a Medicare-certified agency. Medicare does not cover ongoing care or help with personal care, such as bathing or getting dressed. 

Private health insurance covers hospital stays, prescription drugs and doctors' visits. Similar to Medicare, it usually pays for short-term rehabilitative services but does not pay for ongoing long-term care you may need down the road.

Women should plan their financial future well to cover long-term care costs- AARP articles to help with advice

You'll probably need a patchwork of sources — savings, investments, and insurance — to be financially secure enough to pay for your long-term care. — Photo by Jim Westphalen/Stock Connection/Aurora

Disability insurance can tide you over if you are too sick to work. It is salary replacement, designed to cover expenses such as food and mortgage payments, if you or your spouse can't work, but most policies max out once you hit 65.

If you can't get a policy through your employer, buy one through an outside insurer. Disability insurance will usually not be enough to cover the extra care and services you need while you're disabled.

Medicaid is a federal and state program that provides health and long-term care services for people with low incomes and few assets. To get long-term care, people must be unable to manage daily activities such as eating, bathing or dressing. Exactly who and what is covered varies from state to state, so be sure to check your state's Medicaid program.

Next: The current cost of long-term care. »

State programs and services can help you stay in your home by providing home-delivered meals, transportation and housekeeping chores. Contact to find out what's available near you.

Faith-based groups and health-related organizations also offer similar services, as well as support groups and people who drop by for a friendly visit. Call your place of worship and contact the local chapter of organizations such as the American Diabetes Association or the Alzheimer's Association.

Long-term care insurance is specifically designed to cover some of the costs — but do your homework because long-term care insurance is not the right option for everyone. People with limited incomes, or people whose incomes will be significantly lower after retirement, might not be able to afford the cost of insurance premiums over a long period of time. Compare a number of policies from different insurers, read the details and ask your insurance agent a lot of questions. In his column about whether long-term care insurance is right for you, AARP financial expert Jonathan Pond discusses what options to consider before purchasing insurance.

A reverse mortgage lets you tap into your home's equity to pay for long-term care. You do not have to pay back this loan as long as you continue to live in your home. These agreements can also be complicated, so be sure to have your financial adviser review the plan. Go to AARP's reverse mortgage page for additional information and expert advice. 

Another option for some people is a Continuing Care Retirement Community (CCRC). These communities provide supportive housing, assisted living and nursing care on one campus. Some CCRCs offer a life care agreement: You pay a large entry fee in addition to a regular monthly fee. As your needs increase, you start to receive more care, but your monthly fee stays about the same. Here, too, review the contract carefully with a trusted financial or legal adviser. AARP expert Elinor Ginzler offers several tips on housing options in "Which Type of Housing Is Best for You?"

You may also like: Take Charge of Your Future.

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