Roughly half of today’s 65-year olds will eventually develop a chronic medical condition, a disability, or a disorder that will require some form of long-term care services. Waiting until you are already suffering from a debilitating condition will make it nearly impossible to qualify for long-term care insurance. Regular health insurance does not cover the cost of long-term care. Medicare and Medicaid will only cover limited amounts of costs and coverage for a limited amount of time. Without a long-term care insurance policy, you will have to pay for these costs yourself. A long-term care insurance policy can help protect your savings and offer you more options for care.
Long-term care insurance normally applies once you are unable to perform at least two of the activities of daily living. These activities include bathing, eating, dressing, toileting, transferring (from bed to chair/wheelchair) and continence. According to the Genworth 2018 Cost of Care Survey, median annual costs of long-term care insurance were as follows:
- Adult day health care: $18,720
- Assisted living facility: $48,000
- Homemaker services: $48,048
- Home health aide: $50,336
- Nursing home care; semi-private room: $89,297
- Nursing home care; private room: $100,375
According to a 2016 study by the Urban Institute and the U.S. Department of Health & Human Services, most patients receiving long-term care will require services for one to two years. Roughly 14% of seniors will require care in excess of five years. To put it simply, long-term care costs can deplete your savings quickly. Long-term care insurance benefits are usually capped on the amount paid out per day or per month as well as over the lifetime of the policy. The more money you are willing and able to spend on a policy, the greater the coverage options and enhancements available will be.
Medicare will only cover short nursing home stays and limited amounts of home health care. This could result in out of pocket costs if the care and coverage is not adequate. Medicaid limits your choices as not all nursing homes accept it. In most states, it will not cover assisted living. Generally, it is only available to those with low incomes once they have exhausted nearly all of their savings. Therefore, it is imperative you assess your personal situation and determine if a policy makes sense for you.
Most states require a single person to spend down their assets to $2,000 to be eligible for Medicaid. In response, states have introduced partnership programs with long-term care insurance providers to encourage people to plan for long-term care. These partnership plans allow you to qualify for Medicaid sooner. Under these partnerships, the insurance provider offers policies that must meet a certain set of standards. If you purchase one of these partnership policies, you are allowed to protect more of your assets after you exhaust your long-term care benefits and need more help through Medicaid. However, partnership policies, in general, are more expensive.
Considering the cost of long-term care is an important part of your financial plan, especially in your 50’s. In determining the cost of a long-term care insurance policy, the rate you pay will depend on your age, health, gender, marital status, and the desired amount of coverage. Your 50’s is the sweet spot when it comes to purchasing a long-term care insurance policy. If you have any existing health conditions you will likely pay more in premiums. Generally, women pay more than men because they live longer and have an increased likelihood of filing a long-term care insurance claim. Premiums are lower for married couples vs. single people. Premiums will increase as your coverage become more favorable. Coverage enhancements can include higher daily and lifetime limits, cost-of-living adjustments, shorter elimination periods and fewer restrictions on the type of care covered.
Planning for the cost of long-term care is an important factor to consider in your financial plan. Failing to consider this cost could have a severe negative impact on your financial situation. Long-term care insurance offers a way to protect your savings and increase your choice of care options.
As always, if you have questions about your specific situation, please do not hesitate to contact us.
*This article is for informational purposes only and should not be considered investment advice.