Planning for Long-Term Care
The odds of needing long-term care increase as you grow older, and in-home care, nursing home care, and assisted-living costs continue to escalate. If you were to need long-term care, would you be able to meet the expense?
What is long-term care?
Long-term care is the ongoing care of someone who can no longer independently perform basic activities of daily living (ADLs) such as bathing, dressing, or eating, due to an illness, injury, or cognitive disorder. Long-term care is divided into three levels:
Skilled care–continuous “around-the-clock” care designed to treat a medical condition
Intermediate care–intermittent nursing and rehabilitative care
Custodial care–care designed to help the recipient perform ADLs
Long-term care can be provided in private homes, assisted-living facilities, adult day-care centers, hospices, and nursing homes.
But I have health insurance
Unfortunately, private health insurance plans, as well as Medicare and Medigap, don’t pay for most long-term care expenses, particularly custodial care. Medicaid covers some of these costs, but it has strict financial eligibility requirements. You may have to exhaust a large portion of your life savings on your medical care, or divest yourself of your assets, before you’ll qualify for it.
Enter long-term care insurance (LTCI)
LTCI is private insurance that pays benefits if you need extended care. LTCI pays a certain amount per day, for a specified benefit period, for skilled, intermediate, or custodial care. LTCI gives you the freedom to choose where you receive long-term care. A comprehensive policy will cover home care, assisted-living centers, adult day-care centers, and nursing homes. If you need nursing home care, you may have a wider choice of facilities than if Medicaid were paying for your care, since nursing homes may give preference to patients who can pay for their own care.
Long-term care insurance can also help you preserve the assets you’ve accumulated. With insurance covering most of the bill, all of your savings won’t be spent on long-term care.
LTCI considerations
When examining an LTCI policy, pay attention to these common provisions:
Which ADLs trigger policy benefits, and who decides when they’re triggered
The number of days you will pay for your own care before the policy begins paying benefits
Any limitations (a total dollar amount or a time limit) placed on the benefits you’ll receive
The daily benefit amount
The coverage for different levels of care, and the care settings covered
Exclusion of coverage for certain conditions, or waiting periods before coverage takes effect regarding any pre-existing conditions
Riders that offer protection against inflation
Guaranteed renewability despite changes in your health
Is it worth the cost?
The premium you pay for LTCI is based on your age at the time you purchase the policy and the features and benefits you’ve chosen. All other factors being equal, purchasing a policy when you are younger can substantially reduce the premium you’ll pay. Although the cost of LTCI can be intimidating, it’s not as expensive as the care you may need. Still, LTCI isn’t for everybody. Individuals with modest resources may have difficulty affording it, and they may potentially qualify for Medicaid with a little planning.
But if you have significant assets you’d like to protect, are in good health and insurable, and can make the premium payments comfortably (even if they increase substantially in the future), then you may want to seriously consider purchasing long-term care insurance. You may never need it. But if you do, you’ll be glad you have it.