The National Council on Aging conducted a survey that concluded “more Americans worry about paying for long-term care than paying for retirement”, but the study also found that 70 percent of those surveyed flunked a quiz about the basic facts of long-term care. Almost half of those surveyed said they had done little or no long-term care planning.
As America ages, long-term care becomes a critical issue. The assumption that a close relative (daughter, son, etc.) will provide care may not be a valid one. Pressures of jobs, work-related issues such as travel, lifestyle changes and impact on the caregiver; all can make caring for a family member impractical or undesirable. As a consumer, you can’t rely on Medicare, Medicare supplements or basic health insurance plans to pick up the cost of long-term care.
Long term care provides to the needs of people with disabilities or chronic illnesses. If you develop Alzheimer’s, have a stroke or advanced diabetes, for example, you may need assistance with every-day tasks such as bathing, dressing, eating and toileting (moving on or off the toilet). Long-term care insurance helps compensate for some of these services, depending on the coverage you choose, in a variety of settings: from your own home to a skilled nursing facility or an assisted living facility.
In most cases, health insurance plans through your employer won’t cover long-term care costs. Neither does Medicare in any significant way, although it will pay for some short term professional care. Medicaid, the federal/state program for people on limited incomes and having minimal assets, will pay for long-term care, but you must use up your assets and savings before Medicaid benefits kick in. Long-term care insurance might be the answer, but there are a number of important considerations before you make the decision to buy.
Long-term care insurance is expensive: depending on when you take out the policy and what options or coverage you choose, costs can range from around a $1,000 a year at age 40 to as much as $20,000 a year, or more, at age 85. Obviously, the earlier you purchase a policy, the lower your premium; however, the sooner you buy, the longer you’ll be paying that premium.
Other than your age, some of the factors that affect how much you’ll pay for this coverage are the type of benefits you choose. Benefit choices range from nursing home care only to home care only to a variety of sites such as skilled nursing facilities, assisted living or adult day care, etc. The daily benefit typically ranges from $50 to $400, and the benefit period (meaning how long the insurance will pay for your care) can vary from two to six year all the way up to a lifetime. The elimination period is another consideration: this is the period of time before the insurance takes effect – up to that time, all expenses come out of your pocket. A non-forfeiture benefit, which means if you stop paying the premiums you’ll still receive some benefit from the policy, is a good feature to have, but be advised that it can significantly raise your premium.
- Some of the other features to look for when buying a policy are:
- Purchase a policy that doesn’t require hospitalization prior to receiving benefit
- Offers a premium waiver while you are receiving benefits (this means you stop paying the premium as long as you’re receiving services under the policy)
- Has a single deductible for the life of the policy
- Is guaranteed renewable as long as you continue to pay the premiums. (Note: this doesn’t mean the insurance company can’t raise the premiums).
- Covers pre-existing conditions without a waiting period.
Financial analysts and estate planners recommend that you consider buying a long-term care policy if you have substantial assets to protect, you want to pay for your own care, and you want to be in control of what services you receive, where you receive them, and if you wish to remain self-reliant. They also recommend that you don’t purchase this type of coverage if: you can’t afford it, you have limited equity and are on Social Security and if you sometimes have difficulty buying basic needs as food, medicine or utilities.
Long-term care coverage is a complex and often confusing subject. Each state has a SHIP (State Health Insurance Assistance Program) which offers free counseling for the elderly on health-insurance related topics.