Long-Term Care Insurance

It’s a fact. People are living longer. At the turn of the twentieth century, mortality was very high for disease. With the advent of medical technology, even a heart attack doesn’t spell certain death in this century. Those that practice a healthy lifestyle have been shown to live even longer. So while the good news is we are living longer due to advances in medicine, nutrition and living conditions, the bad news is that the older we get, the more likely we will need some sort of long-term care and we may not be able to pay for it. 

Most people I talk to don’t think they will need nursing home care. However, those same people, no matter what age they are, when asked all believe they’ll reach age 65. For those people I have a sobering fact: Those who reach age 65 have a 40% chance of going into a nursing home in their remaining lifetime. That’s greater than 1 in 3 people.

According to the U.S. Bureau of Census, the population of people 85 and older is expected to increase by 33.2 percent between the years 2000 and 2010. Additionally, according to census figures, about 6.5 million older people need assistance with daily living activities. As the number of older Americans continues to increase, that number is expected to double by 2020.  Some of that care can be handled in assisted-living facilities. The costs associated with assisted-living facilities run around $2100 to $2900 a month. As of 2005, the cost for a private room in a nursing home was almost $75,000 a year. Semi-private rooms (double occupancy) weren’t much better at $65,000 a year. Costs for both are increasing at 6% a year. The average stay in an assisted-living facility is 2.5 to 3 years. According to a study done in 2000, the reason for leaving an assisted- living facility was primarily due to death or transfer to a nursing home. So the question becomes, how to plan and pay for this care.

Don’t be fooled into thinking the government will take care of you. Medicare and Medicaid pay for some of your long-term care needs. However, like any government program, there are some very specific “triggers” and conditions that must be met to receive payment. Medicare, the health insurance program that people get at age 65 or when they are permanently disabled only has 100 days of coverage for skilled nursing home care. The first 20 days are paid 100%. The next 80 days require you to pay up to $128 a day (as of 2008). After 100 days, you are on your own. The biggest problem is that most people don’t need skilled care but need custodial care, meaning they can’t take care of themselves due to physical impairment, old age, or physiological brain diseases such as Alzheimer’s. Medicare and Medicare supplements don’t cover anything that is not skilled care. In addition to paying only for skilled care, you must have spent at least three days in the hospital prior to going to a nursing home facility for Medicare to pay for your stay.

Medicaid isn’t much better. While it will pay for your nursing home stay, it will do so only after you are practically destitute. That means no stocks, bonds, retirement funds, or bank accounts. Additionally, if you live alone, they can take your house and other assets. Not an attractive option to say the least. Some people try to avoid this by putting all their assets into a living trust. The government got wise and now has a “look-back” period designed to prevent people from transferring money into a trust and then going into a nursing home within 5 years after transferring funds into the trust.

The answer to this dilemma? Long-Term Care Insurance or LTC for short. LTC policies typically pay for many types of care that is required for a long term including nursing homes, assisted living facilities, etc. It can even cover home care. It also covers custodial care, intermediate care and skilled care as well as care needed because of cognitive impairment like Alzheimer’s. They typically have a dollar-amount that they will pay per day as well as a period of time (called an elimination period) that you must satisfy before payment can be made.  They also have a time limit on how long they will pay the benefit, although some policies will pay for life.

The key to protecting yourself is knowledge. Insurance is a less-expensive way to do it than the other options out there.

Until next time, stay healthy!