Long-Term Care and the Insurance Need

Curious about long-term care insurance and if it is worth it? Let me answer common questions perhaps you and others have about long-term care insurance.

What is Long-Term Care?

Long-term care describes a range of services you may need to meet your health or personal needs over a long (90 days or longer) period of time. Long-term care can be medical care, as in skilled nursing; however, most long-term care is not medical care.

It can be assistance with the basic personal tasks of everyday life, called “activities of daily living,” like bathing, dressing, caring for incontinence, and eating. The need for long-term care is often precipitated by a chronic medical condition like multiple sclerosis, a disability like a brain or spinal injury, a disorder such as Alzheimer’s disease, and/or frailty issues that arise from the natural aging process

How Much Does Long-Term Care Cost? It Depends.

The cost of long-term care varies greatly, depending on the type of care, the place provided (home or facility), and the region where you receive your care. As a sample, here is the cost of care in Lancaster, Pennsylvania, according to the 2016 John Hancock Cost of Care Survery.

Type of Care             Average Cost               Annual Cost

Home health care      $21/hour                      $32,760

Assisted living           $3,830/month              $45,960

Nursing home            $302/day                     $110,320

Remember that these are just average costs and can be much higher depending on your preferences for care. Over an extended period, this adds up. Consider a five-year need, with two years of home health care, one year of assisted living, and two years in a nursing home. The total is $331,940.

How Do I Pay for Long-Term Care?

1. Regular health insurance – No, it doesn’t cover long-term care.

2. Medicare – No, it doesn’t cover long-term care. Medicare covers only short nursing home stays or limited amounts of home health care when you require skilled nursing or rehab.

3. Your assets – Yes, but do you have an extra $331,940?

4. Your income – Yes, but your Social Security and pension will not be sufficient.

5. Medicaid – Possibly, after you have exhausted most of your savings.

6. Long-term care insurance – Yes

7. Life insurance/LTC rider – Yes

8. Continuing care retirement community (CCRC) – Yes, but may also deplete assets.

Why Doesn’t Everyone Buy Long-Term Care Insurance?

I see clients reject long-term care insurance for a number of reasons.

The history of the industry is rocky. The number of insurers has plummeted since 2000. The future of the industry is unknown. Premiums are steep and increasing. Policies are medically underwritten, and not everyone can be covered. Choosing the best policy for your individual circumstances is difficult.

And finally, the most common reason is that clients fear wasting premium dollars if they don’t need long-term care.

What are the Benefits of Long-Term Care Insurance?

1. Long-term care insurance protects savings.

2. Long-term care insurance provides choice of care. Often, the more money you can spend, the better the quality of care you can get. If you must rely on Medicaid, your choices will be limited to nursing homes that accept Medicaid payments and have an available Medicaid bed at the time you have a need. You might not like it. Medicaid beds are not always available and certainly not in the most sought-after skilled nursing facilities. Medicaid eligibility and benefits are subject to change. In Pennsylvania, Medicaid does not pay for assisted living. Each state has individual rules, regulations, and eligibility requirements.

3. These policies provide coordination of care. Your care coordinator will assist you in the placement process, which can relieve you of stress at a difficult time.

When Should I Buy Long-Term Care Insurance?

The sweet spot for purchasing long-term care insurance is just before your 60^th birthday. We recommend working with an experienced long-term care insurance agent who can sell products from at least three carriers.

Be aware that like most insurances, purchasing long-term care insurance is usually a commission-based sales process, so the salesperson earns more if he or she sells you a higher premium policy.

Before you purchase, review the insurance policy with your independent financial adviser, who can help you determine just how much coverage you really need and compare the quotes you receive.

Robin Russo, MBA, CFP®, CRPC® is a financial planner at Rodgers & Associates in Lancaster, Pennsylvania.  She is a fee-only adviser that focuses on retirement planning and tax-efficient strategies. Learn more at www.rodgers-associates.com.