If you can afford long-term care insurance, you should probably consider it. The cost of long-term care, can quickly deplete your life’s savings. For instance, having a home health aide visit just three days a week can cost more than $20,000 annually. Full-time nursing home care, the most expensive type of care, now averages $69,000 to $88,000 per year. In some regions of the country the cost may be twice that amount.
While financial considerations cannot be understated, long-term care insurance isn’t only about money, it also includes peace of mind. Having appropriately funded long-term care ensures you’ll have access to first-rate assistance when you need it. It also means you won’t have to be dependent on others or be a burden to your children.
What are the odds you’ll need long-term care insurance? Greater than you might imagine. There’s about a 70% chance you’ll need some type of long-term care after age 65. However, long-term care services are not just for older people. A young or middle-aged person who has been in an accident or suffers from a debilitating illness may require long-term care services. In fact, 40% of patients receiving long-term care are under age 65.
If you can afford to pay for care without significantly impacting your assets, you may not need long-term care insurance. Conversely, if your assets not including your home are less than $80,000 if you’re married or $30,000 if you’re single, you may not be able to afford the premiums. Therefore, if you’re somewhere in between, long-term care insurance should be part of the discussion the next time you sit down with an advisor to review your financial plans.
Long-Term care services, whether obtained in a nursing home full-time or in your house a few days a week, can cost a considerable amount. However, prices vary widely throughout the country due to cost of living differences, state and local regulations and other factors.
In Wisconsin, the median annual rate for home health aide services and assisted living is $49,000. The median annual rate for a nursing home is $88,000, which has increased by 6% annually for the past five years.
The best way to ensure that you’ll have access to high-quality, long-term care services is to have long-term care insurance coverage. There are two main ways to get coverage – buy it on your own, or obtain it through an employer-sponsored insurance program that your company may offer. Some benefits also are available from the government, through Medicare and Medicaid.
However, you should be careful about relying on government programs. Medicare covers only short-term skilled nursing home care, and Medicaid will pay for your care only if your assets are very limited. Some states have Long-Term Care Insurance Partnership Programs that allow you to buy private long-term care insurance and remain eligible for Medicaid benefits if your private insurance runs out. Read on to learn more about the various sources of protection.
Buy It on Your Own
This is the most reliable way to cover the potential costs of long-term care while protecting your savings. You can purchase coverage from any number of companies, and there are policies and features to fit most price ranges. Because there are so many options to weigh when considering a purchase, you’ll want to find an agent who specializes in long-term care insurance. That person will be able to explain the many features of long-term care insurance and help you strike the appropriate balance between the benefits you desire and the money you have to spend.
Get It through Your Employer
A growing number of employers offer group, long-term care insurance as a voluntary employee benefit. Typically, an employer will contract with a particular insurance carrier and allow its employees to purchase coverage, often through automatic payroll deductions. Because employees pay for coverage out of their own pockets, the policies are almost always portable, meaning you can keep them in place if you change jobs. One potential advantage of buying through your employer is that you can sometimes get coverage that would have been more difficult to obtain on the open market. This is especially true of employees who have health problems or a poor family health history.
With most group plans, employees are offered the same premium as others in their general age bracket (e.g., 45-54 year olds), regardless of their health status or actual age. So, if you’re an older employee or perhaps have some health issues, the one-size-fits-all premium offered through your employer may be lower than what you’d be able to obtain if you tried to get coverage on your own. A downside of buying through work is that you’re limited to the companies and products that your employer makes available to you through your benefits package, and you might be able to find a better price or policy by shopping on your own.
Medicare is the federal government’s program that pays healthcare bills for older Americans. When it comes to long-term care, there’s a common misconception that Medicare will pay a good chunk of the cost of long-term care. This is not true. Medicare only covers short-term skilled nursing home care that you receive after being hospitalized for at least three days.
For instance, if you get in a car accident, Medicare may cover your care in a rehabilitation facility for a period of up to 100 days. Medicare also pays for some skilled at-home care but only for short-term, unstable medical conditions and not for the ongoing assistance that many elderly people need. Medicare will not pay for any custodial care, and 95% of all long-term care is custodial, not skilled. For more information, visit the Medicare Web site.
Medicaid is the federal government’s program that pays healthcare bills for Americans that meet federal poverty guidelines. In addition to covering doctor visits, hospital stays and other standard medical expenses, Medicaid pays for about half of all nursing home costs in the U.S and a smaller, but growing, portion of the nation’s home care costs. However, it is important to remember that Medicaid will only pay for care if you have very limited assets.
Qualifications vary by state, but generally, you may keep only the house in which your spouse or dependent resides, the furniture, a car, a burial plot, funeral funds, and a modest amount of cash. Having Medicaid pay for your care also means you may not have much say in choosing the facility that will provide your care. For more information, visit the Medicaid Web site.
The Long-Term Care Insurance Partnership Program began in the 1980s as a demonstration program in four states (California, Connecticut, Indiana and New York) to encourage people who might otherwise rely on Medicaid to buy long-term care insurance.
Participants who deplete their policies can retain a certain amount of their assets and still qualify for Medicaid – provided they meet all the eligibility criteria. This is an important distinction. Medicaid eligibility is not automatic. To qualify, you must meet your state’s income and functional eligibility requirements. A state’s functional eligibility requirements for Medicaid may be stricter than those for private long-term care policies, which typically require that you be cognitively impaired or require help with two or more activities of daily living.
The Wisconsin Long-Term Care Insurance Partnership (LTCIP) program uses qualified private long-term care insurance coverage as a funding option to assist individuals in paying for their potential long-term care expenses. The program is intended to encourage the purchase of private long-term care insurance by allowing policyholders to protect some or all of their financial assets should they apply for Medical Assistance.
Individuals who purchase qualified Long-Term Care Insurance Partnership policies receive initial long-term care coverage from their private insurance carrier. If individuals subsequently seek Medical Assistance coverage for their long-term care needs, they may be allowed to exclude a certain amount of personal assets and still be eligible for Medical Assistance. This amount will be equal to the amount of benefits received under the qualified Long-Term Care Insurance Partnership policy. LTCIP is a dollar-for-dollar arrangement meaning that the personal assets protected will be equal to the amount of benefits paid by the qualified private insurance policy.
LTCIP gives individuals another choice to consider as a part of their retirement and financial planning. Individuals are encouraged to discuss the LTCIP with their financial services professional or trusted person with sufficient knowledge of the program and the consumer’s financial goals before making a decision.
Long-term care insurance policies that qualify for Long-Term Care Partnership Program status are intended to allow you to protect some or all of your assets and still qualify for Medicaid.
Some insurance companies with long-term care policies that qualify for partnership program status may offer existing long-term care policyholders the option of exchanging their existing long-term care policy for a qualified long-term care partnership policy. You are not required to accept the exchange option offer, nor are long-term care insurers required to offer an exchange option.
Long-term care partnership policies must include inflation protection coverage that meets specific minimum standards based on your age at the time you apply for a qualified long-term care partnership policy.
Ages 60 and below…
…the policy must provide compound annual inflation protection.
…the policy must provide 3% annual simple inflation protection or provide compound annual inflation protection.
Ages 76 and above…
…the policy may provide the inflation protection identified above but is not required to do so.
All long-term care partnership policies are intended to be federally tax-qualified long-term care insurance policies as defined by federal Internal Revenue Code.
Purchasing a qualified long-term care partnership policy does not guarantee you benefits, coverage eligibility, or asset protection under the Medicaid program. For example:
States may withdraw from the partnership program.
If you exhaust your long-term care insurance benefits under a policy that qualified for partnership program status, you may find that the long-term care services you are receiving are not covered services under Wisconsin’s Medicaid program, i.e., assisted living coverage.
If you exhaust your long-term care insurance benefits under a policy that qualified for partnership program status, you may find that the facility in which you are receiving care does not accept Medicaid.
If you move to another state, you may find that that state does not participate in the long-term care partnership program and that it does not recognize your long-term care policy’s partnership program status in reference to qualifying for Medicaid.
Long-term care insurance pays for a wide range of services and procedures that typically aren’t covered by a person’s medical insurance. The types of care fall into three categories: skilled, intermediate and custodial.
If you have a serious illness or injury that you can recover from, you will probably receive skilled care from nurses or professional therapists. Skilled care is provided daily, usually ordered by a physician, and involves a treatment plan. In short, skilled care helps get you better.
This type of care is the same as skilled care, but not provided on a daily basis. For instance, if you injure your leg and need to visit a physical therapist five times a week, this would be considered intermediate care.
Unlike skilled and intermediate care, which is used to improve your health, custodial care isn’t intended to get you better. Instead, custodial care includes assistance with daily activities like bathing, eating, dressing, toileting (getting on and off the toilet and other tasks associated with personal hygiene), continence and transferring (getting in and out of bed and chairs). For example, catheter or colostomy drains are types of custodial care. Custodial care can range from in-home care provided two or three days a week to 24-hour nursing home care.
When should I buy a long-term care insurance policy?
As with most kinds of personal insurance, the younger you are when you purchase long-term care insurance, the lower your premiums will be. Once you own a policy, premiums generally don’t increase with age, unless an insurance company raises them for a whole class of policyholders.
When you consider that 40% of those receiving long-term care are under age 65, you should give some thought to buying coverage when you’re still relatively young. Doing so should allow you to lock in a low rate while providing you with coverage that may be needed sooner than you think. Also, be aware that most companies won’t sell individual policies to people under age 18 or over age 84.
If you can’t buy as much coverage as you think you need, consider buying an affordable plan now and enhancing it later when your financial situation improves.
Many people mistakenly think long-term care is synonymous with nursing home care. A nursing home is a good example of a facility that provides long-term care services, but it’s just one of the many settings in which long-term care is delivered. In many cases, care is provided in the home often by a visiting nurse or a home health aide. Long-term care services are also provided in places like assisted living facilities and adult day care centers. Because long-term care insurance policies may differ in what they cover, it’s important to be familiar with the different locations where you can receive care. Below we describe the four settings in which most long-term care is delivered.
Home care is a simple phrase that encompasses a wide range of health and social services delivered at home to recovering, disabled, chronically ill or terminally ill persons. These services may include medical, nursing, social, or therapeutic treatment, assistance with essential activities of daily living, and even light household needs, such as shopping and cooking.
Generally, home care is appropriate whenever a person prefers to stay at home but needs ongoing care that cannot easily or effectively be provided solely by family and friends. More and more seniors; electing to live independent, non-institutionalized lives, are receiving home care services as their physical capabilities diminish. It’s also a popular choice for younger adults and children coping with chronic conditions or disabilities.
Assisted Living Facilities
Assisted living facilities are residential centers that provide continued care for those who want or need assistance performing certain daily living activities. These facilities, which are growing in popularity, generally offer personal services, 24-hour supervision and assistance, recreational activities, and health-related services. They are designed to minimize the need to move around, and typically provide residents with more privacy and independence than a nursing home setting.
Nursing homes are dedicated facilities that provide comprehensive long-term care services. Though they primarily serve the elderly, nursing homes will provide care to people of all ages who are in need of extended long-term care services. The goal of care in a nursing facility is to help individuals meet their daily physical, social, medical, and psychological needs in a controlled setting.
Nursing homes generally provide around-the-clock care and may offer medical, rehabilitative, personal and residential services. However, all this care comes at a price: nursing homes currently cost on average $69,000 to $88,000 per year, and that cost can more than double in certain regions. Prices and services often vary by location and facility, so it pays to shop around for the facility that meets your needs and budget.
Adult Day Care
Adult day care centers are community-based programs designed to meet the needs of functionally or cognitively impaired adults. These structured, comprehensive programs provide a variety of health, social, and other related support services in a protective setting during daytime hours.
Get the Facts about Long Term Care Insurance, Costs & Coverage
Traditional health insurance and disability insurance are not designed to pay for long term care services. Additionally, Social Security and Medicare do not pay for the costs of long term care. Private long-term care insurance may be your best option to help cover the future cost of care. Below are some startling statistics about long term care in America.
40% of people receiving long-term care are working-age adults between the ages of 18-64. – National Clearing House for LTCI Information, 2008.
74% of consumers ages 55 to 65 polled for a recent survey said they are concerned about needing some kind of long term care. – Prudential Financial Inc. Newark, N.J. 2010 Long Term Care Cost Study.
About 70% of Americans over the age of 65 years will need long-term care services during their lifetime. By 2020, this number is expected to exceed 12 million. – Prudential Research Report: Long Term Care Cost Study, 2010.
About 74% of consumers between the ages 55-65 are already looking into some type of long term care. -Prudential Research Report: Long Term Care Cost Study, 2010.
Aging Baby Boomers will significantly affect the potential demand for long-term care services over the next two decades. According to research by Prudential, over the next 20 years, the number of Americans age 65 and older will more than double to 71 million, comprising roughly 20% of the U.S. population.
Nationally, home health care costs have grown by 13% since 2008 and the annual cost for a private room in a nursing home exceeded $90,000 in 2010. -Prudential Research Report: Long Term Care Cost Study, 2010.
About 70% of people over age 64 will require some type of long term care services during their lifetime. More than 40% will need care in a nursing home. – National Clearinghouse for Long Term Care Information, 2008.
Women will need care longer (3.7 years on average) than men (2.2 years on average), mainly because women typically live longer. – National Clearinghouse for Long Term Care Information, 2008.
While about 1/3 of people 65 years old may not ever need long term care services, 20% will need long term care for longer than 5 years. – National Clearinghouse for Long Term Care Information, 2008.
Helping Protect Families and Their Dreams What dreams do you and your family have for your Tomorrows?
Wherever tomorrow takes you and your family, Transamerica Life Insurance Company can help. Long Term Care insurance policies from Transamerica Life have helped many families prepare for unexpected circumstances and responsibilities, and helped protect their dreams against the high costs of long term care services.
Long Term Care insurance is only as good as the company behind it, and Transamerica Life has a reputation for delivering on our policies’ promises when they are needed most. We have helped protect families and provided dependable service for over a century, and have over 25 years experience specifically focused on Long Term Care insurance.