Care planning is complicated, but critical

Becoming the caregiver for a sick or disabled loved one can be stressful physically, emotionally, mentally - and financially.

The National Alliance for Caregiving and the American Association of Retired Persons estimate that 44 million American adults provide assistance to elderly and disabled adults in their community without any compensation.

The market value of that care exceeds $306 billion annually, almost twice the amount spent on nursing home care and home health care costs combined.

Another study done at Georgetown University in 2004 calculated that of adults who receive long-term care at home, 78 percent get all of their care from family and friends (unpaid), 14 percent from a combination of family and paid assistance, and 8 percent from paid care alone. The National Women's Health Information Center estimates that two thirds of unpaid caregivers work a full- or part-time job, most are women, and most are between 35 and 64 years old.

Becoming a caregiver, either part-time or full-time, can dramatically impact your finances.

Even assuming that the person receiving care has sufficient income streams, becoming a caregiver could require you to reduce your work hours or quit working entirely. If the person requiring care does not have adequate income, you may need to help by covering expenses or taking that person into your home. Social Security, Medicare and Supplemental Security Income may provide some help, but qualifying can be difficult and complicated. For example, having too many assets in a disabled child's name can limit their eligibility for SSI.

Many people mistakenly assume that Medicare or Medicaid will pay for nursing home care. Unless your family member is indigent, they won't qualify for Medicaid. Medicare, which covers retirees over age 65, covers only the highest level of nursing home care - skilled care, provided by trained medical personnel around the clock - and only if your loved one goes from a three-day hospital stay directly to the nursing home. Even then, the payments are limited. For the first 20 days, Medicare pays 100 percent. For the next 80 days, the individual pays $133.50 per day. Beyond that, the individual pays the full cost.

Long-term care insurance can provide coverage for nursing home and home health needs, but it must be in place before the need arises. Many individuals purchase an LTCI policy when in their 50s, although some financial professionals recommend doing so earlier.

Pricing for long-term care policies varies with the age and health of the individual. If there's a question of ability to pay out of pocket for years of nursing home care, you may want to discuss long-term care insurance with your spouse, your parents and anyone else for whom you may wind up responsible.

You and your spouse may also want to consider disability insurance. Thanks to advances in medicine, conditions that once led to death now often lead to disability.

The individual and family wind up in a Catch 22 - losing the income that person would have produced, while having the same, or greater, living costs for that person. Social Security does provide income to permanently disabled individuals, but those payments rarely come close to replacing the wages or salary that person earned before becoming disabled.

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