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By John Sastry, J.D., CFP® – Vice President & Financial Planning Officer 

Earlier this year, Central Trust Company introduced a new Medicare presentation entitled, “The ABCDs of Medicare”. As a refresher, there are three primary components of Medicare: Part A (Hospital), Part B (Outpatient/Medical Coverage), and Part D (Prescription). Additionally, Part C (Advantage Plans) are an all-encompassing solution, which bundles all Medicare benefits. To make matters even more confusing, Medicare Supplemental plans exist which are an “add on” to Part A, B, and D plans.

For a more in depth review of Medicare Plans, view our article on The ABCD’s of Medicare by Central Trust Company’s Barbara Braa.

A very important fact that does not get addressed enough is the impact of non-covered medical costs which are beyond the obligations/coverage of Medicare. In order to pay these non-covered expenses, one needs to be prepared to either pay out of pocket or obtain additional or different insurance.

These lesser-known costs include “unskilled” care due to a cognitive impairment and physical impairments caused by an inability to perform two or more Activities of Daily Living (ADLs). ADLs could include bathing, dressing, walking, transferring, toileting and eating.

If you are reading this article, there is a reasonable chance that you are at risk to experience medical costs beyond the scope of Medicare. Why? Because of your life expectancy.

Affluent people (defined as having $500,000 or more in liquid net worth) have higher life expectancies than the non-affluent general public. Specifically, affluency allows men to live 21% and women to live 13% longer on average than the general public. This expanded life expectancy for affluent individuals comes with added health and financial risk. In fact, almost half of those age 85 or older require long term care (either home health care or in a nursing home), of three to five years, on average. And, 79% of long-term care expenses are related to cognition.

Home health care is care provided in the patient’s home. This is typically a more expensive type of care than in a nursing home since a host of services are required for incapacitated people to stay in their own homes. In the Midwest, it is not uncommon for home health care to run from $26 to $30 per hour (that is if you are lucky enough to find a service that is accepting new patients).

Nursing home costs are generally less than home health care costs because nurses and nurse’s aides are leveraged to care for multiple patients in one facility. Costs for physically impaired nursing home patients can run from $5,000 to $8,000 per month. For the cognitively impaired, the costs are significantly higher, as a much higher standard of care is required.

These are complex issues that are ever-changing. If you have questions or concerns about the impact of a longer life expectancy and how it may impact you financially, please consider the benefits of a comprehensive financial plan. Central Trust Company provides financial planning as a complimentary service to our clients. A financial plan can help in forecasting these risks, potential costs, and options to mitigate the same.

If you would like additional information on the planning process and how to get started or otherwise review an existing plan that you may have, please contact any one of your Central Trust Company team members. Our experienced, highly credentialed team stands ready discuss your individual needs, address specific Medicare questions, run various scenarios and models, and, if you desire, involve your tax and legal professionals in the process.

To learn more about Central Trust Company or specifically about our financial planning capabilities please visit our Financial Planning page.