LONG TERM CARE INSURANCE
Long term care is extended care that consists of help with activities of daily living (such as dressing and bathing), and/or care needed due to severe cognitive impairment (such as the dysfunction caused by Alzheimer’s disease).This care can be received at home or at a facility such as an assisted living facility or a nursing home. This care can be very expensive, and is a great threat to financial security in retirement.
The longer we live, the more likely it is that we’ll need extended care before we die. So, a healthy 55-year-old may have as high a risk of needing long term care as an unhealthy 55-year-old, because the healthy person has the longer life expectancy.
Most people underestimate the risk of needing long term care. Leading research tells us that more than half (52%) of Americans turning 65 today will need extended care.
What would happen to your family members — emotionally, physically and financially — if you live a long life and might need care for a few years?
THE COST OF LONG TERM CARE
True Cost is more than dollars and cents.
Long term care is expensive, even in some cases where no monetary payment for the care is involved. How can this be? It’s because much of the actual long term care that takes place in the United States today is unpaid: often referred to as “informal” care, it’s provided by relatives and friends.
However, this unpaid care does have a cost. Although loved ones may be willing and happy to help, the burden of being a caregiver can be great. Long term care can be physically demanding, especially for an untrained caregiver. Emotional costs can also be tremendous. Time spent caring for a parent can add up, taking precious time away from one’s own spouse and children, as well as one’s job. As a result, there may be a heavy toll in economic terms. Many caregivers end up scaling back their own careers – not only compromising their current income, but also their future financial security.
The question is not whether your loved ones will take care of you if you need LTC; the question is instead, would you want them to have do it?
Professional Care Costs
According to a comprehensive report published in 2017, the national median cost for either a home health aide or for homemaker services is $21/hour. The national median for assisted living facilities is $45,000/year, with a private nursing home room costing $97,455.2 It is important to keep in mind that costs can vary dramatically depending on location. The person who gave you this information can show you exact up-to-date costs in your area.
The information here is provided for education purposes only and should not be construed as insurance advice. Please consult your license nurse LTC advocate for advice regarding your specific circumstances.
BASIC POLICY DESIGN TERMS
Daily Benefit – The maximum daily (or monthly) amount that insurer will pay, once you have qualified for benefits.
Elimination Period – Like a deductible, this is the number of days that must pass between benefit eligibility and the start of benefits. Can be either defined in a policy by service day (a day on which you pay for covered services), or by calendar days (no requirement of paid services).
Inflation Provisions – Built-in inflation coverage is an optional benefit (rider) that is either selected (or not) when purchasing coverage. It increases the policy’s benefit automatically on the policy’s anniversary date, with not action required on the part of the insured, and no health questions. Other inflation provisions, such as options that can be exercised in the future, are sometimes available.
Benefit Period – When a claim is eligible for payment, the benefit period is the number of years that the policy will pay for covered services, if the full daily benefit were to be used each day. Policyholders, who use less than their full daily benefit may find that their policy’s benefit period is effectively extended. For example, most policies with a $300 daily benefit and a 2-year benefit period would pay out for 4 years in the event that only $150 in daily covered care costs were actually incurred.
PAYING FOR PROFESSIONAL LTC
Most LTC is paid by one of the following: personal funds, government programs, or LTC insurance. Personal funds may involve drawing down retirement savings or other assets, using retirement income, or even funds provided by adult children.
Medicare Won’t Pay
Medicare health coverage is designed primarily to cover medically-necessary care, skilled care, and some preventative screenings. The Medicare website itself states, on the page titled What’s not covered by Part A & Part B?: “Services that include medical and non-medical care provided to people who are unable to perform basic activities of daily living, like dressing or bathing: Long-term supports and services can be provided at home, in the community, in assisted living, or in nursing homes. Individuals may need long-term supports and services at any age. Medicare and most health insurance plans don’t pay for long-term care.” (emphasis added)
Medicaid is a Payer of Last Resort
Medicaid is a means-tested program. It is designed to provide health care and long term care for the poor. Medicaid has an institutional bias, meaning that, although nursing homes are filled with people whose bills are paid by Medicaid, home care paid by Medicaid is not as readily available in most states.
In the vast majority of states, in order to qualify for Medicaid, an individual is only allowed to have $2,000 of (countable) assets to her name. Countable assets generally include all investments and assets, with the exception of business property and most primary residences. Legislative reform has made it virtually impossible for an individual (i.e. unmarried, widow or widower) to do the kind of last-minute Medicaid planning which was once commonplace.
Unlike Medicare and Social Security, Medicaid is not a program that we pay into through payroll taxes. Medicaid is funded jointly by general tax receipts of both the federal government and the state government where the applicant resides.
Most people are concerned about the long-term sustainability of government programs, including Medicaid. Speculation abounds that it will become even tougher to qualify for Medicaid in the future.
Tax Deductions and Other Incentives
For many years, the federal government and individual state governments have encouraged people to do long term care planning and purchase long term care insurance: There are two primary types of incentives: (1) tax deductions/credits, and (2) Partnership Programs. These are explained on a state-by-state basis in Tax Breaks and Incentives for Long Term Care Insurance. Ask the nurse advocate who gave you this information for a copy.
WHO BUYS LTC INSURANCE
It’s difficult to discuss typical buyers and their policies, since policies vary so much. However, the information compiled below may be helpful as you consider long term care insurance. It’s wise to keep in mind that your best course of action may bear little resemblance to the purchasing behavior of others.
The average purchaser is age 56, with most (76.4%) purchasers between the ages of 50 and 69. However, many younger people are buying coverage. Twenty percent of purchasers are under age 50.4
The most popular benefit period is 3 years. The majority of purchasers buy policies with a 3, 4, 5 or 6 year benefit period (83.7%). A little more than 10 percent (10.2) buy a benefit period of 2 years or less.5
LTC PERSONAL ACTION PLAN
None of us knows for sure whether or not we will need long term care. What we do know is that the care is expensive, and the need can last for years.
And what we also know is that it’s smart for each of us to have a plan in place to help pay for long term care. To help lift the burden from the shoulders of our loved ones. A plan to provide money at the most vulnerable time in our adult lives. A plan to help us maintain the retirement that we were counting on – one with dignity and quality of life.
However, having a plan in mind – without taking any action to make it a reality – will be useless when the need for care arrives. To benefit from the knowledge you have just learned, take action now. Call the nurse advocate who gave you this information, and decide whether or not to purchase LTC insurance.
Taking action now can help ensure that you have the resources to pay for the kind of care you want. In addition, having a plan in place when the need arises will allow you to substantially life the burden of care giving off your loved ones. Contact the nurse advocate who gave you this information to learn more about long term care insurance.