The Onus Is on You, Not the Government

10/12/2009 12:01 am EST


Terry Savage

Author, The Savage Truth on Money

Last week, CMS (the Centers for Medicare and Medicaid Services) reduced Medicare funding for nursing homes by an estimated $16 billion over the next ten years. Twenty-four states have already reduced Medicaid funding this year. And $313 billion of additional cuts have been proposed by the Obama administration to fund health care reform.

Message: Don’t count on government to take care of you in your old age! They’re already running out of money—long before the baby boomers retire en masse. Remember when boomers hit school age and were squashed into modular classrooms? As boomers age, you’ll see crowded, modular nursing home rooms—perhaps a final use for those old FEMA trailers! But all kidding aside, this is serious, a real warning.

The cost of long-term custodial care is the most devastating thing that could happen to your retirement plans—even worse than a bear market. Yet it is the thing we least want to think about.  And boomers haven’t been forced to confront this reality, because our parents are living longer, with new hips, knees, and heart valves. But eventually, we will all wear out!

This kind of “custodial care” is not covered by Medicare or Medicare supplements, although the program does cover a limited amount of “skilled” nursing home care after a period of hospitalization. This year, it costs nearly $80,000 on average to provide full-time custodial care–help with bathing, dressing, etc.—at home or in a nursing facility.

Could you cover the cost of home care or a nice assisted-living facility for yourself, your spouse, or your parents? Would you want to place mom in a Medicaid-funded nursing home when her money runs out? If you’re a single woman or a widow with no children, would you want this kind of care in your old age?

Of course not. Yes, long-term care insurance is expensive—but newer policies offer lower cost options that can provide for at least a portion of your care, keeping you out of a Medicaid nursing home.

I devoted an entire section of my latest book—The NEW Savage Number—to this subject. You can find it now in paperback at bookstores, the library, or on my Web site,

Once you’re over 65, it is ten times more likely you will need some form of long-term care than that your home will burn down! Yet you keep on paying your homeowners’ insurance premiums without complaint. Shouldn’t you insure against the greater odds for the cost of nursing care?

I hope this is the worst financial advice your get, and the biggest waste of money! I hope you—or someone you love—never needs to actually use the benefits of your long term care insurance policy. But hope is no substitute for planning—and it’s too late to buy insurance when you actually need it.

What are your plans for care in your old age? Do you think the government will make good on its commitments to the elderly as the baby boomers retire? Please post a comment and join the conversation.

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