Is Long Term Care Insurance Right For Me?
Many individuals are curious about Long Term Care Insurance, and for good reason. It has been around for decades, but just recently started getting a lot of buzz again. This is because few people currently have it, but many people in the future will need it. We will dive into why interest in Long Term Care Insurance is rising, what Long Term Care Insurance covers, and help you decide if it is right for you and your family.
A Boom in Demand for Long Term Care
Most people do not want to spend their days in a nursing home or long-term care facility. An AARP study in 2018 found that 76% of people 50 and older want to age in the house they have spent their lives in. (Breeding) The reality is unfortunately, a little more complicated. 70% of the people currently turning 65 will have to spend some time using Long-Term Care, with the average duration being 3 years. (PAHC) What’s concerning is only 25% of people think that they will at some point need this kind of intensive care. And most fail to realize Medicare does not cover nursing homes after 100 days. There is a national mismatch between expectations and reality on the subject.
The increase in demand for LTC (Long Term Care) is mainly because of advancements in Medicine. The medicinal and scientific revolutions of the 21st century have led to a significant increase in life expectancy. EU records show life expectancy was 69 years old in 1960. In 2010 it had increased to an astounding 80 years old. (PubMed) While it is great people are living longer lives, they are not necessarily living healthier ones. Conditions such as Diabetes, Dementia, and Parkinson’s are affecting more seniors than ever. These ailments and more can complicate their ability to take care of their daily needs at an older age.
Cultural shifts have also led to an increased need for care for seniors. More households have parents that are both working. This leaves less time for people to take care of their aging parents while they tend to their own careers and families. Children are also moving more often for work, leading to a dispersal of potential caretakers across the country.
The Cost of Long-Term Care
When it is determined Long Term Care is needed, many people are shocked by the price. A study from the American Council on Aging determined that the average cost of a nursing home in the US is $290 a day. This leads to a whopping annual cost of $105,850 per year.
ADD IN THE PRICE OF HOME HEALTH CARE DAILY AND ANNUALLY HERE. Note this is the average cost, and prices vary depending on the region. It is common for people in the northeast or west coast to pay $130,000-180,000 per year! (Genworth)
You may be wondering how so many people are in nursing homes if it is this expensive. Luckily, the Medicaid system has stepped in to help fill the gaps. If someone needs an LTC facility and does not have the funds, in most cases a state's Medicaid system will cover them. The only problem is that this only happens after becoming Medicaid eligible through the “Medicaid Spend Down.”
Medicaid eligibility is usually reserved for people in object poverty. This means low annual income and low levels of assets. For people to qualify, they first must spend all their savings and sell off many of their assets. This means you may have to go through your life savings paying for Long Term Care before you are finally put on Medicaid. This is what the Medicaid Spend Down is; burning through your savings and assets before the state steps in.
If you try to pass on your assets to your children or family members before attempting to go on Medicaid, the state may intervene. Each state has a “Medicaid Look Back Period.” This is where the state can look back a certain number of years into your financials to determine if you have tried to game the system. If they find any large transfers of income or wealth to outside parties, they can claim that money back. Most states have lookback periods of 5 years. (ACOA).
Many seniors need to know they will have coverage and options in case they need Long Term Care. And most would like to without having to blow through their hard-earned life savings.
What is Long Term Care Insurance?
Long Term Care Insurance helps cover you for Home Health care or Nursing home care in the event you need assistance with the “activities of daily living” or ADL’s. The 6 ADL’s most insurance companies adhere to are bathing, dressing, toileting, eating, transferring (ability to move around) and continence (cognitive impairment). Most policies pay out benefits when you are unable to do 2 of the 6 ADL’s. There also may be a waiting period of 60-90 days depending on your policy. (Kiplinger)
Your insurance policy will pay out a daily benefit to help cover the expenses associated with the help you need. Know that this money is not tied to only nursing homes. It can also be used to pay for in-home care, community services such as meals, adult day care, and even transportation. (NIH) If you prefer to age in your home, you can use your benefits to do so.
Is Long Term Care Insurance Right for My Family and Me?
After reading this article, you may think that Long Term Care Insurance is a no brainer. But it is quite an investment, so it makes sense to talk to an insurance broker to decide. There are three things to consider in your decision: flexibility, family support and estate planning.
Home healthcare and Long-Term Care can be incredibly expensive. It may be tough to afford in your later years when you have a fixed income. Depending on your budget, you might not be able to use the quality home health services or nursing homes you would like to. In many cases it makes sense to prepay for these services in your better earning years while you can.
As you get older you should take inventory of the family near you. If you have an abundance of family close to your current location, you may not need as much in the way of Long-Term Care. Family can help you while you live at home and may even be able to provide housing at your older age. If you do not have a large family or they live far away, Long Term Care Insurance is something to consider. It will allow you to maintain your independence and give you assurance you receive the help you may need.
The final and most common reason for Long Term Care Insurance is estate planning. As we described above, nursing homes and similar services have a high price tag. Many people have spent their lives building wealth that they plan to pass down to their family. If you or a loved one spends considerable time in a Long-Term Care facility, it could substantially reduce your assets. In some cases, it completely wipes out people’s inheritances. We have seen 6 figure inheritances wiped out in a matter of a few years while family members are in these facilities. This insurance is a way to ensure your family will retain the assets you have worked hard to provide for them.
This is an overview to help guide your decision on Long Term Care insurance. We are happy to answer any other questions you have, no matter what your situation is. Call the trusted brokers at NJ Life & Health to determine if you need Long Term Care insurance, and to help guide you through your options. Visit our website at https://www.njlifeandhealth.com/request-an-appointment or call our office at 848-226-6897 to schedule an appointment.
Works Cited Breeding, Brad. “Will Aging in Place Soon Become a Thing of the Past? | MyLifeSite.” MyLifeSite, https://www.facebook.com/pages/My-LifeSite-formerly-LifeSite-Logics/113351608835154, 4 Feb. 2019, https://mylifesite.net/blog/post/aging-place-thing-of-the-past/.
Brown, Guy. “Living Too Long - PMC.” PubMed Central (PMC), PudMed Central, 18 Dec. 2018, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4328740/.
“Cost of Long Term Care by State | Cost of Care Report | Genworth.” Genworth: Financial Solutions for Long Term Care, Genworth, https://www.genworth.com/aging-and-you/finances/cost-of-care.html. Accessed 26 Mar. 2022.
“How the Medicaid Look-Back Period Works.” Medicaid Planning Assistance – Helping Americans Obtain the Medicaid Long Term Care They Require, American Council On Aging, 14 Dec. 2021, https://www.medicaidplanningassistance.org/medicaid-look-back-period/.
Lankford, Kimberly. “When Long-Term-Care Policies Kick In | Kiplinger.” Kiplinger, Kiplinger, 11 June 2017, https://www.kiplinger.com/article/insurance/t036-c001-s001-when-long-term-care-policies-kick-in.html#:~:text=Most%20policies%20pay%20when%20you,of%2060%20or%2090%20days.
“Long-Term Care Trends and Statistics | PHCA.” PHCA, Pennsylvania Health Care Association, https://www.phca.org/for-consumers/research-data/long-term-and-post-acute-care-trends-and-statistics. Accessed 26 Mar. 2022.
“What Is Long-Term Care? | National Institute on Aging.” National Institute on Aging, National Institute On Aging, https://www.nia.nih.gov/health/what-long-term-care. Accessed 26 Mar. 2022.