Long Term Care Q & A
Q. What is long term care?
Long Term Care is care that a person needs when they have a serious illness or disability that lasts for a period of time and they are not able to take care of themselves. Long Term Care includes a variety of services provided by nursing homes, assisted living facilities, adult day care centers, or home delivery specialists.
Q. Why are most people unprepared for the cost of an average long term care stay?
Fewer than 20% of those that need long term care are able to cover the cost for just one spouse let alone both. Long Term Care insurance is one of the most important types of insurance, and yet only 1% of the U.S. population has coverage.
Q. What are some statistics about Long Term Care Insurance?
- 60% of all individuals require Long Term Care at some point in their lives (Washington Post, April 1996)
- The cost of nursing homes averages about $110 a day, or $40,150 a year (National Health Policy Forum, Issue/Brief no. 668, 1996)
- The average nursing home stay is 2.5 years (Trusts & Estates, 1996)
- The total cost of Long Term Care can easily exceed $250,000
- Medicare currently pays for only 17% of all Long Term Care (Health Care Financing Administration, 1997)
- Medicare pays for only the first 100 days of nursing home care (U.S. Health Care Financing Administration Study)
Q. What are my options for long term care coverage?
- Those who are rich (w/more than $1,000,000 to $1,500,000 in liquid assets outside of real estate), can "self insure".
- For those who are poor (broke with less than $2,500 in assets and very sick) Medicaid or medical welfare will cover the cost of long term care.
- For those caught in the middle, private long term care insurance is the most viable option
Q: Will Medicare cover everything for me?
Not for very long. For those that qualify, Medicare will pay up to 100 days of LTC. The average length of a covered stay in 1996 was 27 days. Besides, do you want to rely on the government? Remember also that they pay the full amount for only the first 20 days, after which you pay the first $81.50 a day.
Q. What are the advantages of Long Term Care insurance:
- Helps maintain control and independence
- Removes the burden placed on families
- Access to quality care
- Protects assets
- Peace of mind
Q. What decisions should I consider when purchasing LTC Insurance?
- Daily Benefit - the amount of money you will receive from the insurance company on a daily basis for your care. You usually can select between $50 and $250 per day. Find out how much care costs currently in your area and it will help you make the decision as to what daily benefit you want. (also see inflation protection below).
- Benefit Period - the length of time you will receive payments from the insurance company once you need care. You usually can select a specific number of years (2,3,4,5), or lifetime plans are also available. The average length of stay in a nursing home is 2 1/2 to 3 years. Note: A three year plan will be less expensive than a lifetime plan.
- Elimination Period (deductible) - the number of days that you will be responsible for paying for your care before the insurance begins to pay. This works like most insurance deductibles except it is stated in a number of days instead of dollars. Most plans have a variety of options like 0 days, 30 days, 60 days, or 100 days. Be sure to check if this deductible is once in a lifetime or if it can repeat.
Also, there are three optional decisions that can be added to your plan.:
- Inflation Protection - this allows your benifits to grow with inflation. It is built into your original premium and therefore will increase your annual premium. You may have choices of 6% simple or 6% compounded. You do not have to add this to your plan - but it is certainly recommended if you are younger when you buy your policy.
- Home Health Care Coverage - some policies will also give you the option of receiving insurance benefits in your own home. This options will allow you greater choice as to where your care can be paid for by the insurance. It may cover community care like Adult Day Care Centers and Assisted Living Facilities as well as care in the home. This option will increase your premium.
- Nonforfeiture - this option provides some form of paid-up benefit if the policy should lapse. This option increases your base premium.
Q: What are the odds that a person will need Long Term Care?
According to a recent study published in the New England Journal of Medicine:
- For a man over 65, the odds are 1:3 or 33% that he will need Long Term Care in his life,
- For a woman over 65, the odds are 1:2 or 50% that she will need Long Term Care in her life.
Women are more likely to need Long Term Care because they live longer.
Q: Can everyone qualify for Long Term Care insurance?
Unfortunately, no. All the money in the world can't buy a Long Term Care insurance plan. It takes a little good health as well. The best time to apply for coverage is when you are healthy. Your premiums will be lower and you will be more likely able to get coverage.
Q: How much does Long Term Care insurance cost?
Premiums are based on three factors:
- Age
- Current Health
- What options you design into the plan
Long term care insurance plans have level premiums and are guaranteed renewable. That means your rate is the same for the life of the plan.