Long Term Care Insurance

As defined by AARP, long term care refers to the many services beyond medical care and nursing care used by people who have disabilities or chronic (long-lasting) illnesses. Long term care insurance helps you pay for these services, which can be very expensive. A long term care policy also ensures that you can make your own choices about what long-term care services you receive and where you receive them.

Long term care insurance typically covers the cost of:

• Help in your home with daily activities like bathing, dressing, eating and cleaning
• Community programs, such as adult day care
• Assisted living services that are provided in a special residential setting other than your own home. These services may include meals, health monitoring, and help with daily activities
• Visiting nurses
• Care in a nursing home

The Demand

Our society is aging at a rapid pace with a generation of baby boomers born between the years of 1946 to 1962.  This age group represents 1/3 of all Americans and totals approximately 77 million people.  In a little over 200 years, life expectancy has doubled in our nation.  Today, almost 80% of Americans will live past age 65 and their life expectancy will be another 15 to 20 years.  Currently, there are 35 million people in the United States over age 65.  In the next 25 years, the number will be closer to 70 million.

The Need

It is a fact that home and community-based care and nursing home care currently represent the largest out of pocket expense facing older Americans.  For baby boomers, who are expected to live even longer and face higher costs, long term care has the potential to devastate their asset base.  The average annual cost nationally for nursing home care is about $68,000, or $187 per day.  A ten-hour shift for a home health care aid costs about $190.  Using the growth rate of 5.8% projected by the Center for Medicare and Medicaid Services for the period 2001 to 2011, these costs will at least triple in the next 20 years.  This means that the 50-year-old of today can expect to spend at least $320,000 per year if he or she requires nursing home care at age 80.  The actual risk of needing long-term care (either home care or nursing home care) is greater than 50%.

The Problem

Together, conventional health insurance and Medicare pay barely over a fourth of the nation’s bill for home health care and nursing home care of almost $150 billion annually.

Conventional insurance, including individual and group health insurance for people under age 65 or retiree health plans restrict coverage to skilled care.  Skilled care has nothing to do with how sick you are.  A person can be totally paralyzed or in a coma and still not be receiving skilled care, in which case private insurance will not pay. 

Skilled care is care to get a person better such as providing physical therapy.  It is not long-term care such as helping a person eat, bath, move about etc.  That is why conventional health insurance does not pay for long-term care.  Medicare can only approve up to 100 days in a nursing home per benefit period for skilled care.  Medicare pays nothing for eight-hour shifts at home and only pays home health care visits when some skilled care is being done.  An Alzheimer’s patient is a classic example of someone who needs little or no skilled care and would likely not benefit from Medicare.  There is no prospect of Medicare expanding into the area of this need anytime soon, if ever.  Medicaid, the federal and state welfare program for the poor, will cover long-term care but you must be nearly broke to qualify.  To qualify, your income must be no more than $1,809 per month.  Furthermore, you must have no more than $2,000 in assets, excluding countable resources such as your house and car.

The Solution

Currently, when people think of insurance as a part of their asset protection strategy, they think about coverages for home, auto and major medical.  They do not think about long-term care even though the risk is higher, the costs are greater and the solution is no more expensive.  Waiting until you are in your 60’s to purchase long-term care insurance is not good advice because

1. Anything could happen to you long before your become a senior,
2. The longer you wait, the greater the odds are that you will not be insurable due to health conditions, and
3. Although you will pay premiums longer by not waiting, you will pay less in total. 

Consider a 30-year-old who purchases a long-term care policy rather than waiting until age 50.  He/she could purchase a $100 daily benefit plan with an annual premium of $440.  If he waited until 40 to purchase, he/she would have to buy a $150 daily benefit for a premium of $733 because the cost of care in 10 years went up.  At age 50, he/she would have to purchase a $250 daily benefit for an annual premium of $1,682.  In all three scenarios, the cost of coverage to age 80 would be $22,000, $29,000 and $50,460 respectively.  The 30-year-old paid the least.

Please call us today to see how much a long term care policy would save you.