Thinking Out Loud About Long Term Care

A recent study released by Mutual of Omaha quotes the following statistics regarding Long Term…

1. 75% of people over age 65 eventually need long term care

2.  The average nursing home stay is 3 years

3. 50% of people entering a care situation are penniless within one year

4. 1 in 5 households provide long term care to someone over age 18

5. The average cost of nursing home care is $80,650

With respect to those that purchased long term care policies the study found that …

1. 55.1% of long term care policies were purchased by those between the ages of 55 to 64

2. 88.3% of purchase decisions were motivated by planning for retirement or retiring

Some of the motivating factors the study found that led to the purchase decision were …

1. Protect assets

2. Avoid burdening family

3. Ensure they receive care in a quality facility

4. Ensure that they have options for care

5. To Maintain personal dignity and independence

6. Peace of mind …

IN reading through some of the study’s findings I hope that our blog readers might be able to gain some perspective for their own thinking on financially protecting themselves from a potential long term care need.

When thinking about where we might find coverage for that potential long term care need (expense), we should be reminded that Medicare does not provide for Long Term Care. Medicare pays only for medically necessary skilled nursing facility or home health care however you must meet certain conditions for Medicare to pay for these types of services. Generally, Medicare pays the full cost of care for NF services for up to 20 days per benefit period and partial costs for the remainder of 100 days when the client meets Medicare requirements.

TYPES OF POLICIES TO COVER LONG TERM CARE EXPENSES

Policies (insurance plans) that do cover long term care expenses come in all colors and flavors. There are:

•  tax-qualified plans,

• non-tax-qualified,

• partnership plans, and

• non-partnership plans.

There are also traditional life insurance and annuity policies being issued now from insurance companies that have Long Term Care riders. Additionally, existing life insurance may be used as a means of funding a long term care need. Choices and options for long term care coverage are plentiful and there are significant cost and benefit tradeoffs to any alternatives you may compare so do your homework so that you can make the optimum decision for you and your family.

TYPES OF CARE OR LEVELS OF CARE DEFINED FOR LONG TERM CARE

There are varying types of care depending on what kind of care you need, where you get the care, and where you live. There are policies that pay benefits out of a ‘pool’ of funds that pay you until that ‘pool of funds’ runs out of money irrespective of the years of benefit you had purchased.

TYPES OF BENEFIT PROVISIONS REGARDING PAYMENT FOR LONG TERM CARE EXPENSES
There are policies that start paying you (the elimination period) based on days you actually had ‘service care provided’ versus the calendar days that you are eligible for policy benefits (activities of daily living limited). This could potentially extend the elimination period way beyond the stated days of elimination you thought you had to wait for so you might want to consider the calendar day policy. There are reimbursement plans that pay the long term care expense, up to the daily limit, when the service is given. Conversely an indemnity plan pays the daily benefit whether or not a long term care expense is incurred that day or not. So you will pay more for an indemnity plan than the reimbursement plan. But some folks, maybe with faulty thinking, like the feature as a sort of ‘premium repayment’ benefit. I have to say, you always need to run the numbers but usually the old adage – ‘there’s no free lunch’ applies and in most cases I find it to be an expensive lunch!

CONCLUDING COMMENTS …
So needless to say there is a lot to consider regarding the long term care need and how to pay for it should it arise. A good reference site to begin educating yourself on Long Term Care can be found at the Medicare.gov website. Another government site is theDepartment of Health and Human Services National Clearinghouse for LTC information.

Individual long term care policy design is very versatile but you need to know what you are getting and what you are giving up in benefits and costs when tailoring a policy purchase for your family. Remember, too, that the long term care decision isn’t just about us, it is about those around us and the loved ones that care for us and making things as easy as possible for them should a long term care event arise.