When you consider the growing number of people over 65 in the U.S., the declining popularity of long term care insurance seems troubling. To improve awareness of how this insurance can benefit people, October has been named Long-Term Care Planning Month. Here are ten reasons you might want to consider purchasing long-term care insurance, especially if you’re getting older:
- You have a high chance of needing long-term care. If you live to age 65, you have a nearly 70 percent chance of experiencing a disability and needing some paid or unpaid help with basic daily living skills. On average, women require such help for 3.7 years, men for 2.2 years. The government estimates the number of people who will need long-term care will reach 27 million by 2050.
- Many people need professional long-term care services, whether due to the severity of their disability or their personal circumstances. If the average 65-year-old needs about three years of long-term care, he or she will spend about two-thirds of that time at home and one-third in either a nursing home or assisted living facility, according to a 2005/6 study. (Kemper, Komisar, and Alecxih, “Long-term care over an uncertain future: What can current retirees expect?”)
- Facility-based long-term care costs a lot. The 2013 Genworth Financial survey found that a single room in an assisted living facility costs a median of $3,450 per month, or $41,400 per year. A semi-private room in a nursing home cost a median of $207 a day, or nearly $75,000 per year. A private room costs even more, reaching a median of $83,950.
- Home-based care also adds up. Care from a licensed home health aide, who can help a disabled person with bathing, dressing and transferring, costs a median of $19 per hour, while adult day care costs a median of $65 per day.
- Your health insurance plan does not cover long-term care services, most of which are non-medical and consist of assistance with the “activities of daily living.” These include bathing, dressing, using the toilet, transferring (as from a bed to standing or standing to a chair), incontinence care and eating.
- Medicare also does not pay for typical long-term care services. It will cover a maximum of 100 days in a skilled nursing facility, hospice care or home health care only if you need skilled care, such as skilled nursing service, physical therapy or other types of therapy, if you are admitted to a Medicare-certified nursing facility within 30 days of a hospital stay of at least three days. It will not pay for assistance with the activities of daily living.
- Although the Medicaid program pays about 60 percent of all long-term care costs in the U.S., you might not want to rely on it if you need long-term care services. First, since Medicaid is designed to cover the needy, you must spend down your assets to become eligible. Second, Medicaid does not cover the cost of living in an assisted living facility, although it will cover certain home-based care services and nursing home care. Finally, your nursing home of choice might not accept Medicaid. The National Survey of Residential Care Facilities by the National Center for Health Statistics found that 60 percent of residential care communities do not serve Medicaid beneficiaries. (The survey included assisted living facilities with nursing homes; as stated earlier, Medicaid does not cover costs of an assisted living facility.)
- Private long-term care insurance (LTCI) policies often provide broader coverage than Medicaid. All LTCI policies cover nursing home care or care in an assisted living facility, if you need a lower level of care. Many also cover the cost of home-based services, such as home health aides and adult daycare. Coverage of these services can allow you to stay in your own home if you cannot care for yourself completely.
- Private LTCI gives you the coverage you need without requiring you to spend down your assets. Buying coverage can protect your estate for your heirs.
- You’ll never be younger than you are now. As with most types of health insurance, you’ll pay less when you’re young and healthy. Premiums for LTCI generally remain level for the life of the policy, unless the insurer raises rates for all insureds in your rating class.
Of course, if you buy coverage early, you could pay more in premiums over your lifetime. The American Association of Long-Term Care Insurance recommends that most people apply for coverage in their mid-50s. You can lock in lower rates if you’re in good health. In addition, some policies will allow you to buy a base amount of coverage now and add to it in future years.
Should you buy long-term care insurance? If you will qualify for Medicaid, or will qualify shortly after entering a nursing home, don’t waste your money. Likewise, if you have enough saved to pay for four to five years of nursing home care for you and your spouse, you probably don’t need insurance. (Be sure to consider the effects of inflation when estimating how much long-term care will cost when you are likely to need it.) Anyone else should consider buying this valuable coverage. You’ll get the best coverage and options from a standalone policy; however, many life insurance policies now offer long-term care coverage through an optional rider.