I first learned that long-term care insurance was a thing when my grandfather needed to be moved to a full time care facility. He’d lived on his own for years after my grandmother passed, but independence became impossible to sustain as he aged.
The long-term care (LTC) facilities my mom and her siblings looked into were more than $6,000 a month.
It’s estimated that about 68% of us turning age 65 will need some form of LTC during our lifetime. As Baby Boomers age, the number of elderly in need of long-term care is expected to double to 27 million by 2050. DON’T STOP READING this because you find that statistic depressing.
Yes, it’s unpleasant to think of a day that our parents might require help. It’s more unpleasant to imagine not being able to pay for the help they need.
Long-term care is not as scary as it sounds. Your parents can live many happy years with LTC at home (still telling you what to do with your life), at day centers, or in assisted living facilities.
THAT is why we have to talk to our parents about their LTC options now.
Long-term care is (1) expensive and (2) misunderstood:
According to a study by the insurer Genworth, the average cost of a semi-private room in an LTC nursing facility is $82,125 per year ($6,843 a month doesn’t even buy you a private room). The average cost for a home health aide is $46, 332 per year. (Go here to find the average costs in your state.)
LTC is NOT covered by health insurance or Medicare. Health insurance, Medicare, and Medigap insurance (insurance which covers the co-pays and deductibles of Medicare) do not cover the largest part of long-term care. And long-term disability insurance (which in most instances you can’t get over age 65) covers lost wages, not medical bills.
If your parents (or you someday) find they need LTC--which can include physical therapy, skilled nursing care, assistance bathing, eating, taking medications, etc.--they will either need to:
have few assets so that they qualify for Medicaid;
have many assets so they can pay for their own long-term care out of pocket;
have long-term care insurance (LTCI); or
none of the above, and it will fall on their children to pay for their care.
I have several friends who are financially responsible for at least one parent’s long-term care. For all of them, it has been difficult. For some of them, it has been financially devastating, because in Los Angeles LTC nursing facilities can cost upwards of $10,000 a month.
As it turned out, my grandmother had taken out an LTC policy for her and my grandfather. My mom didn’t even know what long-term care insurance was until she found out that her mom had a policy that would cover most of the costs of my grandfather’s care.
Here are some facts about long-term care insurance:
What is long-term care insurance?
LTC insurance policies vary but most reimburse the holder up to a daily maximum amount (the average in 2007 was $160 per day, or about $4,800 each month) for home health care--skilled nursing, personal care and custodial care (supervision)--or care in a nursing facility, Alzheimer’s facility, adult day care facility, or assisted living facility. They also cover hospice (as does Medicare when life expectancy is short) and respite care.
Respite care is huge if you are a caregiver. It provides temporary relief of your caregiving duties, usually via a short stay for your loved one in a nursing facility, so that you can get a break.
When should you or a parent purchase an LTC policy?
The average age of people buying personal policies is 60 and the average age of people buying policies through work is 50.
The younger you are, the less expensive the premium, but obviously you’ll likely be paying it over a longer period of time.
Who qualifies for LTC insurance?
Like the majority of life insurance policies, most LTC policies require medical underwriting. In other words, you have to prove that you are in relatively good health.
Pre-existing conditions or an existing need for long-term care might disqualify you or raise your premiums.
How much does LTC insurance cost? Is it worth the cost?
Long-term care insurance is not cheap--in 2007 the average was $2,207 annually. The premiums are based on your age, the coverage and benefits you choose, and the policy's limits.
According to this Forbes article, LTCI policies pay less on the dollar than life insurance, especially for men. In fact, financial experts disagree on whether LTCI policies are the best use of your money. The answer depends on your financial situation:
Would you qualify for Medicaid (in most states your income must be under $3,000 monthly)?
Do you have enough assets to cover long-term care costs out of pocket?
Do you mind using up those assets or would you prefer to leave them for your children?
Or, do you have enough money to use some assets for your care and still leave something to your kids? (If so, you should really be blogging about how you made that happen.)
What do Medicare and Medicaid cover?
Briefly, Medicare covers short-term recoveries. For example, it covers 100 days in a skilled nursing facility following a related hospital stay, but only the first 20 days are covered fully.
It covers activities of daily living (ADLs) like bathing and dressing, but only in conjunction with medically necessary care.
And it covers medically necessary durable medical equipment such as wheelchairs and hospital beds, but patients are usually responsible for 20% of the cost.
I can tell you from experience, Medicare is very specific about what equipment they will allow. They covered a wheelchair for my father who has mobility issues due to an illness, but Medicare won’t cover an electric scooter for him. Their reason for denying the claim is that my dad retains the ability to push his own wheelchair with his arms…so, never mind that he can’t use his legs.
Medicare also covers hospice care (end of life care) when life expectancy is under six months.
Medicaid programs vary by state; however, if you qualify, it usually covers long-term medical care in a nursing facility or at home but it does not cover custodial care.
Here’s a comparison of what is covered by Medicare, Medigap and private insurance.
What do I need to know when selecting an LTC policy aside from what benefits are covered?
Make sure you know the policy's limits – both the maximum daily amount the policy will cover and how many years the policy will last.
LTC policies often have time deductibles (usually 90 days). That means the policy won’t start to cover your costs until you have needed the care beyond a certain number of days (e.g. you’ll start to be reimbursed on the 91st day of your stay in a nursing care facility).
With some LTC policies, premiums can increase over time, so be sure you ask about this possibility before you commit to a policy.
Where can I buy LTC insurance?
If you have a trusted financial advisor or insurance broker, start there. If you are a member of USAA (for military veterans and families), my parents are happy with the LTCI provider they found through them.
Otherwise, you can try LTC Consumer, which PolicyGenius has partnered with because of their unbiased advice and great customer support. Their free LTCI quote tool will give you a good idea of what you can expect.
There are a whole lot us who make too much to qualify for Medicaid but who don’t make enough to cover long-term care. If you look at some of the statistics --like the average cost of an LTC nursing facility being over $6,500 per month--and consider that most of that cost is not covered by Medicare or other health insurance, I believe there is a very compelling argument that most of us should consider long-term care insurance.
My grandmother was still caring for her husband and giving her kids financial freedom long after she was gone from this world. The long-term care policy she took out was a big gift to her family.
My parents are determined to give the same gift to my sisters and me. My husband and I will give the same gift to our kids.
And then hope that none of us ever needs to use it.
Photo: half alive