About Long Term Care Insurance


The Looming Crises - 15 Key Questions About Longterm Care

1. What is longterm care?

Longterm care services are provided in a variety of settings, including adult day care, nursing or assisted living facilities, respite care, and in-home and community-based settings. Longterm care includes a range of services for people who have functional limitations or chronic health conditions. Their needs include sub-acute, rehabilitative, medical, skilled nursing and supportive social services.

2. Who uses longterm care?

Two out of every five Americans will need nursing home care sometime in their lives. At present, more than 1.5 million Americans live in the nation's 25,000 assisted living facilities.

The average age of a nursing home resident is 79; 75 percent of those over age 65 are women. About 63 percent are disoriented or memory-impaired.
The elderly population is growing fast and, with the baby boom generation aging, nursing home populations will increase exponentially over the next 15 to 20 years.

The fastest growing segment of our population is those over age 85. One out of every four in that age group lives in a nursing home.

3. Why has the need for longterm care increased?

One reason the demand for longterm care has increased is because people are living longer than they ever have before. Also, families are geographically scattered; employment and educational opportunities, among other things, have spread families from coast to coast. Time, travel expenses, and other responsibilities make it nearly impossible to provide the care older family members need. Another reason is that the primary caregivers in most families are women, and today more women work outside the home. Finally, grown children are unable to care for their aging parents because they, too, are often in need of some degree of assistance.

4. How much does long term care cost?

Nursing home costs vary depending on location and the level of services required. On average, nursing home care costs about $41,000 per year, or $110 per day.

5. Who pays for longterm care?

Two out of three nursing home residents—or 69 percent—rely on the Medicaid program to pay for their care. Medicaid is a welfare program designed to meet poor people's health care needs. Only about 7 percent rely on Medicare, and the remaining 24 percent pay through private funding sources. Longterm care insurance pays for only 3 percent of the nation's nursing home care costs.

6. Does Medicare cover long term care?

Medicare does not even begin to address the needs of a society that is living longer and longer. When Medicare was first developed in the mid-1960s, we had only limited knowledge regarding the special needs of elderly people, including chronic care needs.

7. Why does Medicaid pay the nursing home care costs for so many elderly nursing home residents when Medicare is supposed to take care of the elderly's health care needs?

While originally intended to meet the poor's health care needs, Medicaid became America's longterm care system by default because the nation lacks any comprehensive longterm care program. Many elderly middle-class citizens must rely on Medicaid to pay for long term care because they have exhausted virtually all of their life savings and assets to pay for their care. Most spend down their assets within one year of being admitted to a nursing home.

Medicare, on the other hand, pays for the elderly's doctor visits, emergencies and short term illnesses, but not for longterm care. Medicare does offer a limited benefit for nursing home care, but only following a three-day hospital stay.

In such cases Medicare will pay for the first 20 days of nursing home care. On the 21st through 100th day of their nursing home stay, Medicare patients must pay the first $89.50 per day of costs incurred for their care. After the 100th day, patients must turn to Medicaid or their own resources to pay for their care.

8. What about estate planning so that the state will take care of you if you really need it?

Congress recently enacted legislation to prohibit professionals from counseling people in ways to shelter assets for the purpose of qualifying for Medicaid.

Even more important is understanding the limitations of Medicaid and other public programs. Longterm care insurance guarantees individuals freedom of choice—not only freedom to choose the setting for their care, but the peace of mind of knowing that they will receive quality care and services.

9. What are the odds I will need long termcare insurance?

The actual claims statistics on homeowner's and automobile insurance are substantially lower than data from surveys on longterm care risk. A recent analysis by the consulting firm Deloitte & Touche noted that 60% of people over age 75 will need such services. Longterm care is clearly the number one risk facing elderly Americans—and it's the one for which Americans are least insured.

10. What if I don't need longterm care for 25 years down the road? Don't I have more pressing concerns?

Most Americans don't understand the difficulty they may face in qualifying for longterm care insurance from a health standpoint in future years. Insurance companies are beginning to look at existing health problems much more carefully than they did a few short years ago. Better to have purchased longterm care insurance well before you need it, rather than take a chance and possibly not be able to get it if you really need it.

A longterm care policy should be affordable or it doesn't make sense to take one out. Assuming you have assets to protect, it might make far better sense to use a portion of the interest your money is earning to purchase longterm care insurance, rather than continue to risk all your money to pay for your care.

11. How can I afford longterm care insurance premiums when I've got a family, kids in college, a mortgage, a car that needs replacing, and all the usual bills to keep a family clothed and fed?

The purpose of longterm care insurance is to protect your money so it will be there for those purposes. Can you think of anything that might be more important to your family than protecting them financially should you have a change in health?

12. Won't a plan that covers a person and his or her spouse cost more?

It really shouldn't. A well-designed plan for husband and wife should be able to be funded out of cash flow, interest on assets or a combination of the two. Knowing the risks and consequences if one of you requires longterm care without insurance, it makes sense to see if you can develop a sensible, affordable solution.

13. How can I be sure coverage bought today will be adequate in 25 years?

Policies written for younger people should have inflation written into them. That way, although you're paying more for this option, benefits will more than double over 20 years by building in a 5% compounded growth to keep pace with inflation, while your premium remains the same.

14. What about recent legislative changes in health care?

Nearly all of the discussions and legislation in Washington have been in the opposite direction from any national health plan. The recently signed legislation sent a clear message to people that each one of us must take reponsibility for the cost of our own long term care.

15. Is there a solution?

Yes. Congress needs to help educate Americans about the risks of longterm care, its costs, the limitations of government longterm care assistance, and steps families can take to protect themselves and their assets.

Congress should encourage families and individuals to buy longterm care insurance by establishing federal tax incentives and passing federal consumer protections that prohibit misleading sales practices and require insurance companies to offer only comprehensive, high-quality policies.

Long Term Care | LTC Insurance | Other Issues