Don’t think you need it? Consider this: a full 50% of Americans over the age of 50 will need long term care at some point in their lives. The average cost of nursing facility care (or home health care assistance) is $61,000 per year, and the average stay in a long term care facility is 2½ years. Can you think of a faster way to decimate your nest egg?
Or look at it this way: you would never go without homeowner’s insurance, would you—even though the chance of a house fire is just one in 1,200. Yet according to a recent study, if you are age 65 or over, you are ten times more likely to find yourself in a nursing home this year as you are to have your house burn down.
So if haven’t looked into Long Term Care Insurance—or LTCI—now is the time. Become an educated consumer. Find out how it works and what it covers, so you can determine if it is right for you. This overview will get you started.
What Exactly Is Long Term Care?
Long term care is the assistance you may need if you become unable to care for yourself because of prolonged illness or disability.
Generally, a person becomes eligible for LTCI benefits when he or she is unable to perform any two of six “Activities of Daily Living” (bathing, eating, dressing, toileting, continence, and transferring—say from a bed to a chair). People with Alzheimer’s disease or severe cognitive impairment are also eligible and those who receive doctor-certification that they require care for at least 90 days.
LTCI provides coverage for such care, whether received in a nursing home or in your own home. In fact, one of the advantages of LTCI is that it allows you to make your own healthcare choices—such as electing in-home care that permits you to remain at home.
No, Medicare Doesn’t Cover It!
One of the myths of long term care is that Medicare will foot the bill. But Medicare pays for just a very small percentage of nursing home care, and eligibility is very restrictive. (For a nursing home stay, Medicare requires that you must be hospitalized for at least three days and must receive skilled care daily. In addition, you must enter a Medicare-approved facility and stay in a Medicare-approved bed.)
Here’s how it works: Medicare covers all eligible expenses for the first 20 days. For days 21-100, you first pay a co-payment as of 2005 is $114.00 per day; Medicare pays the difference. After 100 days, Medicare ceases to pay altogether.
In other words, Medicare is designed to cover short term recuperative care. But for most long term care patients, the average period of care exceeds 900 days. And unless you are impoverished and qualify for Medicaid (public aid), you are responsible for those staggering bills. That’s where LTCI comes in.
What’s the Best Time to Buy?
The best time to buy, quite simply, is now. The younger and healthier you are, the more insurable you’ll be—and the lower your premiums. Already in your 70s? If you’re in fair health, chances are you’ll be able to obtain coverage. You won’t know unless you ask, so by all means ask.
Here’s a good thing to know: once your policy is in effect, premiums never increase due to changes in your age or health. Premiums remain level unless your insurance carrier raises premiums for an entire class of policyholders in your state. Most policies are guaranteed renewable, which means that the company cannot cancel the policy or reduce benefits regardless of age.
Another excellent reason to buy right now: you’ll have the protection in case you need it.
What Should I Look for in a Policy?
Believe it or not, LTCI has been around for more than 30 years. During that time, policies have evolved to become quite sophisticated. As a result, there are a number of plan design features you’ll need to consider when evaluating a plan:
Coverage: A good LTCI plan includes coverage for nursing facility care, home care, adult day care, assisted living facility care, hospice care, and homemaker or companion services. In addition, the plan should cover your pre-existing conditions and offer complimentary care management and consultation, which can be invaluable in mapping the course of care.
Daily Benefits: LTCI benefits range from $100-$500 a day. Your choice should be driven by the cost of living in your area. Find out the actual long term care costs in your region, and use that knowledge to determine your benefit. (Your insurance agent should be able to provide this information.) And don’t forget to consider inflation! Will the benefit you choose today be viable ten years from now? Because healthcare costs are rising faster than the cost of living, you may wish to purchase an optional inflation rider, which automatically increases your daily benefit at regular intervals.
Benefit Duration: Most LTCI carriers offer a choice of two, three, four or five year benefit durations, as well as an unlimited duration. The longer the benefit duration, the higher the premiums. Consider your age, health, and budget when choosing a benefit duration.
Insurance Carrier: Don’t be tempted to save a few dollars by purchasing coverage from an unknown quantity. When evaluating insurance carriers, ask for their industry ratings. Rating services such as Standard and Poors and A.M. Best evaluate insurance carriers based on their financial condition and claims paying ability. A strong, solid company will be eager to provide you with its current ratings. A number of solid, reputable insurance carriers—such as Met Life, Genworth, Prudential, John Hancock, and others—offer LTCI. Trust your instincts.
How Much Will LTCI Cost?
Premiums vary according to your age, health, and plan design.
How Do I Get LTCI?
LTCI is available on both an individual and group basis. If you are working, ask your employer if your company offers a plan. If not, ask if your spouse, children or even your children’s spouses can obtain LTCI at work. Group LTCI coverage is often available to extended family members.
Otherwise, find an independent agent who specializes in LTCI. An independent agent represents multiple top-rated companies, so he or she can find the most competitive plans. In addition, a knowledgeable agent will be able to answer your questions and help design the right plan for you.
Protect your nest egg—and your healthcare options. For seniors with an eye on the future, Long Term Care Insurance makes more sense than ever.
Murray Gordon is the president of MAGA Limited, a long term care insurance agency in Deerfield, IL, http://www.magaltc.com. Contact: Lekas & Levine PR, Joannepr@aol.com.
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