Overview of Long-Term Care
Putting a long-term care insurance plan in place starts with education.
This page is designed to walk you through a 10,000 ft overview of long-term care planning. It’s important that you understand your options first so that when you’re ready for us to design your custom plan, you have a foundation of knowledge on how long-term care insurance works.
What is Long-Term Care?
Long-term care insurance provides a tax-free stream of income to help pay for care costs that are not generally covered by medical insurance, Medicare, or Medicaid.
What's covered?
- Custodial Care
- Skilled and Unskilled Care
- Nursing Care
- Therapy Care (occupational, speech, physical)
- Help with Personal Care (dressing, bathing, meal preparation, light housework)
Where is care covered?
- Your Home
- Adult Day Care
- Nursing Care
- Assisted Living Facilities
- Nursing Homes
- Hospice Care
- Special Care Facilities
- Adult Family Homes
Who Should Look Into Long-Term Care Planning?
You should look into long-term care planning, if you want to…
- Stay in your own home for as long as possible and avoid nursing home care.
- Stay in control of your care options and avoid becoming a ward of the State.
- Avoid liquidating assets and paying unnecessary taxes.
Traditionally long-term care planning has been aimed at the middle class who are at risk of losing their savings from an extended health care situation. Due to new programs and recent changes at the state and federal level, long-term care is benefiting a wider range of individuals from smaller estates up to the wealthy who have traditionally self-insured.
New programs have also made it easier for older adults to qualify for plans, and some of the newer plans also accept people who may have been turned down in the past due to medical conditions. Today many plans accept people up to age 80 and some alternative plans will go up to age 90.
The Odds are Stacked Against You!
According to the US Department of Health and Human Services, once you reach the age of 65, there is a 70% chance you will use some form of long-term care during your life. In fact, long-term care is the largest single risk you face during your retirement years. Not only does it have the potential to be a devastating financial burden, it can also put a physical and emotional burden on the people you care about most.
Cost for care can range from $25 per hour for an in-home health care worker to over $20,000 per month for a special memory or Alzheimer’s clinic. Because of the growing population of Baby Boomers, long-term care costs are expected to outpace inflation for the foreseeable future. (Between now and 2032, nearly 10,000 people a day will turn 65.)
Cognitive claims are the fastest growing area for long-term care and comprise over 40% of all new claims.
The risk of a long-term care situation outweighs all other risks combined!
Many people believe they are going to live a fulfilling life and then simply go to sleep and take their last breath at the end. The reality for most people is quite different.
Medical advances are helping us live longer. Many of us will face years of declining ability simply because we are getting older. This makes the risk of needing assistance from others grow with every new birthday we celebrate. Currently, there are over 12 million adults living in long-term care situations, and that number is expected to more than double by the year 2050.
You can’t stop the aging process, but you can mitigate the consequences that come with a long-term care situation by making the effort to put a plan in place today.
When is the Best Time to Look into Long-Term Care Planning?
All plans require some type of medical underwriting, meaning the insurance company is looking at your overall health before they will agree to insure you. Health is a key factor in qualifying; age is also a factor. The younger you are when you put your plan in place, the more coverage you will get for the same investment. Younger applicants also have many more plans and options to choose from. There is no advantage in waiting.
Nationally, one in three people who apply for traditional long-term care insurance are turned down. Many people are one doctor visit away from becoming ineligible for long-term care insurance coverage, and once you are turned down, it can be difficult to find a company who will accept your application.
How is Long-Term Care Different from Traditional Medical Care?
Medical care is for shorter-term, acute care: it has the goal of curing us of an illness or fixing us and getting us back to normal. The goal of long-term care is not to cure an illness but to allow us to attain and maintain an optimal level of functioning.
Long-term care encompasses a wide array of medical, social, personal, and specialized housing services needed by individuals who have lost some capacity for self care.
Individuals who require long-term care are generally not sick in the traditional medical sense. They do, however, require assistance to perform the activities of daily living, or they require supervision due to cognitive impairment.
How do You Pay for Long-Term Care?
There are only two ways to pay for the additional costs that come with a long-term care situation.
- Private pay, which is self-insuring.
- Long-term care insurance which transfers the cost to a private insurance company.
What about Medicare, Medicaid, and the VA?
- Medicare Part A (Hospital Insurance) and/or Medicare Part B (Medical Insurance) is for acute care and does not cover long-term care. It covers eligible home health services such as intermittent skilled nursing care, physical therapy, speech therapy and occupational services. Medicare does not pay for 24-hour care or custodial care (meals, homemaker or personal services). Medicare may pay up to 100 days of skilled nursing care after an eligible 3-day hospital stay. The first 20 days have a $0 deductible and days 21-100 require a deductible of $161.00 per day. You can learn more about Medicare coverage at www.Medicare.gov.
- Medicaid is an entitlement program designed to provide care for the poor. In order to qualify for long-term care assistance a person must be devoid of any meaningful assets or income. This means to qualify for Medicaid, you must spend through your savings and assets down to the state required level. When you qualify for Medicaid, you become a ward of the State; they will dictate the location and level of care you receive. Learn more at www.Medicaid.gov.
- VA Benefits are available for some long-term care situations for Veterans and in some cases, their surviving spouse. However, much like Medicaid, VA benefits provided for long-term care are for those who meet certain need requirements based on income and assets. You can read more about available VA Benefits for long-term care at www.VA.gov.
What Triggers a Long-Term Care Claim?
Long-term care is triggered in one of two ways:
- Cognitive impairment such as Alzheimer’s, Parkinson’s, Dementia, or severe memory loss, etc. OR
- The inability to perform 2 of 6 activities of daily living (ADLs)
(Transferring, Toileting, Bathing, Dressing, Eating, Continence)
Your doctor determines eligibility.
How is Long-Term Care Paid Out?
Think of long-term care insurance as a bucket of money that you can access to pay for care when needed. Most policies will reimburse you up to a set rate based on either a daily amount or a monthly amount. Any unspent money remains in the policy for future use.
Many policies describe a term such as three years of coverage. However, that simply describes the minimum amount of time the policy will last if you are pulling out the maximum amount of money from your policy.
Example: If you have a policy that pays $200/day for 3 years, you have total bucket of money of $216,000. If you only use $100/day for care, that same policy will last 6 years instead of 3.
Here’s How You Can Fund an Asset-Based Plan
Home Equity
Income
Savings
Annuities
Retirement Account
Health Savings Account
Cash Value Life Insurance
Compare Plans
There are two main types of long-term care plans: traditional or asset-based (also known as hybrid or linked-benefits). Traditional plans can be strengthened through a state partnership program. Learn more about your options by clicking the links below.