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Financing of long-term care.

There are three basic ways to pay for long-term care in a nursing home: Medicare, Medicaid or private pay (out of pocket or by using long-term care insurance).

Medicare is the federal program offered to those who are needing a skilled level of care after a 3 day hospital stay. Skilled care is best described by the type of care you need due to a hip fracture or stroke - therapy on a daily basis.

Medicare is limited in the number of days it will pay - up to 100. Medicare pays 100% for the first 20 days (after the 3 day hospital stay and if skilled care is needed), beginning on day 21-100 there is a copayment required with Medicare. Most Seniors have a Medicare Supplement policy. Medicare supplements will pay in conjunction with Medicare. Once Medicare stops paying for care, most supplements will not continue to pay.

If you have exhausted Medicare payments the only other options are Medicaid and paying out of pocket (private pay). Medicaid is available for those individuals that are low income or have limited resources. Medicaid is the state welfare program and has limitations as to the amount of assets you can own and the amount of income you may receive each month before you are eligible.

The federal government has instituted restrictions on the transferring of assets out of an estate to qualify for Medicaid. There is a look back period of 36 months or 60 months if a trust has been established. A law was passed in 1996 making it a crime to shift assets to become eligible for Medicaid.

The average annual cost for a year in a nursing home today is around $50,000. This can be financially devastating. Especially if a patient stays the average of 3 years or even longer.

Costs are projected to nearly triple in the next 20 years.

Two of every five Americans over 65 will need nursing home care.

The fact is the longer you live the greater the chance you will need some form of long term care, such as extended care in a nursing home or through a home health agency.

Besides paying out of your own pocket you can purchase long-term care insurance. This insurance must be purchased prior to needing long-term care. The eligibility for the insurance is based on your current health. Therefore if you are already ill, you probably will not be insurable.

Most financial planners recommend that LTC insurance be purchased in your late 50's or early 60's. In this range the cost is quite affordable and your health is probably still pretty good. The premiums are based on your age, health, and the type of plan that you purchase.

Click here to read more about LongTerm Care Insurance.