It’s not an easy issue to talk about and it’s a hard fact to face. But to not be prepared for long-ter care needs compounds the issue even worse. The consequences of no preparation can be dire including bankruptcy and the loss of a family home. What this warning is about is the cost for long-term care at the end of life. But what is long-term care? It is the need of medical and personal services on a continual basis during a chronic illness or condition. This usually occurs after a major medical diagnosis or a traumatic accident.
Why concern is relevant
When the Social Security Act was signed into law in 1935 life expectancy was 58 years for men and 61 years for women. Today life expectancy is 78 years for men and 81 years for women. In that interim of those 13-16 years, according to a study performed by the U.S. Department of Health and Human Services, almost 70 percent of people 65 and over will need some form of long-term care in their future. When that staggering statistic is revealed, one can only wonder why so few people have long-term care insurance; the answer is denial. When a roomful of business executives were asked how many of them believed that they would need long term care one day, only 15 percent of them raised their hands. No one wants to see themselves alone and chronically ill in a nursing home. The belief is that only happens to other people and not to them.
How is it determined if a person needs long term care
The costs of long-term care will be covered shortly. However, let’s first find out how a person comes to need the medical and personal services in the first place. When a person has a chronic illness such as Alzheimer’s disease, Dementia, stroke, broken hip or any other condition, then it will eventually need some type of long-term care. It is determined by the six “Activities of Daily Living”ADLs. If a person needs assistance from another person in “two” of the following areas on a regular basis, then they are classified to need the care:
- Bathing
- Dressing
- Continence
- Eating
- Toileting
- Transference (moving from a wheelchair to a bed)
What are the associated costs?
The types of avenues that long term care can be delivered are a nursing home, the patients’ home, an assisted living facility and an adult day care center. According to a U.S. Department of Health and Human Services report, a private room at a nursing home can be $198.00 a day which is $72, 270.00 a year; $219.00 a day for a private room that comes to around $79, 935.00 a year. If you live in a large city like New York or Los Angeles, then the prices rise to $100,000.00 a year. Other channels are as follows:
- Assisted living facility: $3131.00/month or $37,572/year
- Home care (aid/nurse comes to patients’ house): $21.00/hour (higher in NY and LA) or $43,680/year
- Adult day care center: $67.00/day or $16, 750.00 for a 50 week year
More bad news: Employee health plans do not cover long-term care costs. Even the new Affordable Care plans do not cover the costs. Medicare will only cover 100 days of long-term care and only in a nursing home. However, only the first 20 days are totally covered. Also, to qualify for the costs, a patient must first have been hospitalized for three days straight prior to needing the care. On days 21-100, a partial payment is provided based on the patient’s income and available assets. On day 101 a patient is on their own.
If a patient requires care beyond that point, then they would need to qualify for Medicaid. In order to qualify for that, you have to be indigent. Many people on the cusp of eligibility would have to suffer the Medicaid spend down. This is where a person that has assets such as a house, land and investments would need to sell those items to get down to poverty level. In most states. that is around $3,000.00. They would need to spend the entire proceeds of the sale on their care, and only then would they qualify for Medicaid.
The consequences of being a caregiver
After hearing this news, many would relax on the idea that their family will take care of them. Thankfully, many people could depend on their families for care, but like everything else in life, there is a cost there also. Some costs are financial, say a daughter moves her mother with dementia into her home to care for her. If the daughter worked, then she may need to cut back on her hours or take advantage of the family medical leave act and stay home. In such cases, the home may need to be modified to be wheelchair accessible. Some insurance companies cover this and some do not. Either way the situation detracts from the amount of income into the household even though an extra member has been added. If the household caregiver has children, the time he or she spends taking care of mom would be subtracted from children. This family dynamic is called the “sandwich generation” . Also. if the primary caregiver is married, then a large amount of stress would be put on the marriage since spousal time is also subdivided.
Even greater is the health toll on the caregiver. It is only human that when a person cares for someone they love that once cared for them they forget themselves. They do not eat healthy or sleep regularly. Their social life is almost nonexistent, plus as mentioned above there is less family time with husband and children. If a family member has a chronic condition such as diabetes or high blood pressure, then he or she will not monitor their levels as they should. That puts them at a greater risk for heart attack and stroke. This almost insures they will need long-term care in the future.
Some needed good news
The facts can be overwhelming and downright depressing. However, let not your heart be too troubled as there are options. For one thing, a person with little money and no assets could qualify for Medicaid right away and be cared for by their state’s system. If you do have assets, then the options are varied in long-term care insurance. This insurance is to protect a person in two ways. First, it is to fund the care you will receive from either an assisted living facility, home care company or adult daycare center. Second, it is an asset protection. It prevents a person from having to sell their hard earned valuables for the state to take care of them. Therefore, the savings, investments and family home can be left to their family and not used to pay for their medical care.
The options
There are different types of long-term care insurance. There is the traditional policy, life insurance with a LTC option and life insurance with a chronic care rider.
With the traditional policy, the insured would choose the amount to be paid out based on the insured’s choice of care (home, assisted living etc.). Then select the duration or how long they would want the policy to last (such as 2-4 years or more). Then choose the waiting period where they would fund their own care (usually 30-90 days) before the benefits begin. Finally comes any coverage options such as a joint plan for married couples and so on.
Life insurance with a long-term care option lets you use the death benefit for the expenses incurred with the care. There are several benefits that are available under this option; a financial professional can elaborate on these. It is also possible to have the premiums returned in case things change in the life of the insured. This option would only be used as a long-term care policy and not as a traditional life insurance policy.
The option of a traditional life insurance policy with a chronic care rider is as follows. The insured would have the choice of using the long-term care benefits of the policy while living or have the benefits left to the family after death. When used for services, it can be utilized in all types of care (home, assisted living, nursing home etc.). Remember though, the death benefit decreases as the costs of care are deducted.
Other items to consider
This insurance is mostly geared to individuals 50 years of age and over. However, do not wait too long. When a person needs the services, they no longer qualify for the coverage. A person must be in good health while applying for the insurance. The insurance company will have a nurse give you a medical exam and will ask medical questions. The questions will consist of the applicant’s medical history as well as family medical history. Do not let that fact deter you, act as soon as possible to protect yourself and family. Medical costs can devastate a family’s finances and have sent many into bankruptcy. If it is still a belief that this is not needed or individuals lack assets, then opt for the traditional insurance policy with the chronic care rider. When a person has their own means, they also have choices. Planning gives a person piece of mind. The house is protected, the car is protected and don’t forget to protect yourself and family.