Long Term Care

It's estimated that about half of all 65-year-olds will eventually enter a nursing home. Put another way, you and/or your spouse have up to a 50/50 chance of requiring nursing-home care at some point in your life. The good news is that you have a number of options when it comes to paying for long-term care. There are benefits and limitations with each.

Government Programs

You may be surprised to learn that the benefits provided by government programs, such as Medicare and Medicaid, are very limited. Medicare, for example, pays for only the first 20 days of skilled nursing care after a minimum three-day hospital stay. Patients are responsible for a portion of the cost from days 21 to 100 and all costs after 100 days. Medicare does not cover the cost of custodial care (nonskilled care that includes assistance with activities of daily living). Medicaid may provide some coverage, but only for those with low incomes and limited assets.

Self-Insurance

Setting aside money to cover the cost of long-term care — or using assets you and your family have accumulated — is always an option, but it could be cost-prohibitive. In fact, one study found that you would have needed to set aside about $192,838 in 2005 and earned a 5 percent rate of return to cover the cost of four years of nursing-home care.

Long-Term-Care Insurance

Long-term-care insurance may be a good option for people with assets who cannot afford to self-insure. Most policies cover skilled care and basic custodial care. You can choose the daily benefit, the benefit period (typically, two to five years, or lifetime), the maximum lifetime benefit, the waiting period, and whether you want inflation protection. You may also be able to decide the kind of facilities in which you would like to receive care. Most policies offer nursing-home care, home care, and assisted-living facility care.

Planning may be the best defense to prepare for the risk of long-term-care expenses. Call so that we can review options to help protect you and your family.

Quoted Resources

Long-Term Care is pervasive in today's world. Below you will find statistics from studies that demonstrate just how pervasive the need for long-term can be.

Over 50% of all Americans will need long term care in their lifetime.
(Americans for Long Term Care Security, August 1999)
For a couple turning 65, there is a 75% chance that one of them will need long term care
(The Wall Street Journal, June 2000)
Over 70% of people with Alzheimer's live at home and receive 75% of the assistance they need from family and friends.
(Understanding Alzheimer's, Alzheimer's Association, 1999)
Of the 13 million Americans who received care in 2001, 40% were between the ages of 18 and 64.
(Americans for Long Term Security, Did You Know, July 2002)
It has been estimated that 80% of all people age 65 will need either nursing home, assisted living, home or community care during their lifetime.
(Brooking/ICF Long Term Care Financial Model, 1995)
60% of all Americans who reach age 65 may need long-term care at some point in their remaining lives.
(The Looming Crisis, American Health Care Association, 2000)
50% of employed caregivers gave up work either temporarily or permanently and about 30% experience mental health problems due to care-giving.
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LTC Policy Design

When the two major questions, affordability and health have been answered we can move on to designing a policy. Here is where we begin to tailor a policy that meets your needs and affords you the coverage you seek. By breaking down the steps it will be easier to grasp all the options that are available.

Personal Questions

Date of Birth That's an easy one. Your age will affect your policy premium.
Assets/Net worth You will need to have a grasp of what your assets are and your net worth.
Medical History/Medications Pre-existing conditions and medications do not necessarily exclude you from coverage. They are however important in determining who is likely to insure you and at what cost.

Policy Decisions

Daily Benefit The daily benefit is the dollar amount (generally, $50 to $300 per day) your policy will pay per day for your care. Before you select a daily benefit amount you should check the cost of services where you plan on receiving them. The daily cost of skilled nursing homes, assisted living facilities and agencies that provide home health care can vary greatly from community to community.
Home Health Care A percentage of your daily benefit (50% to 100%) can be used for home health care. Another kind of pooled benefit provides a fixed daily, weekly or monthly dollar amount that may be used for one or more covered services. This gives you greater control over how your care dollars are spent. Make sure you check to see what services are covered.
Inflation Protection Inflation protection should be one of the most important additions to a long term care policy. For an additional premium amount, a $150.00 daily benefit with inflation protection may provide you with the coverage you would expect 20 years from now. While the cost of care will have gone up, your daily benefit amount will also increase. The younger you are when you purchase a policy the more important it is to consider adding inflation protection. An inflation protection feature will increase your premium, however the added benefits will generally help offset the difference.
- 5% Compound Inflation Option - If selected, this automatic Inflation Protection Option increases your Daily Benefit Amount and the balance of the Policy Maximum by 5% each year over the previous year, on a compounded basis.
- 5% Simple Inflation Option - If selected, this automatic Inflation Protection Option increases your Daily Benefit Amount by 5% of the original Daily Benefit Amount each year and increases the balance of the Policy Maximum by the same proportion as the increase in the Daily Benefit Amount from the previous year.
Waiting Period/Elimination Period Think of this as a deductible. This is the period of time during which you must qualify for benefits, before your policy begins to pay benefits. You can select from 0 to 180 days depending on the policy and the company. It is important to understand what each policy considers as days of care as this will affect when you can start receiving benefits. There are three ways companies count off days of the elimination period.
- Actual days that services are received.
- All calendar days beginning with the start of services provided that you receive care at least one day a week.
- Begins the day you are eligible and includes all calendar days regardless of care received.
Maximum Benefit Your policy can cover you for various amounts of time, ranging from 1 year to lifetime coverage. This is usually equivalent to a pool of money, rather then a fixed period of time.

Maximum Benefit Example:

Years	Days	Daily Benefits	Maximum Benefits
2	730	$150	$109,500
3	1,095	$150	$164,250
4	1,460	$150	$219,000
5	1,825	$150	$273,750
6	2,190	$150	$328,500

Those are the basic questions you will need to be able to answer and make decisions on. Here are some additional considerations.

Some companies give preferred rates if you have a good medical history.
There may be a spousal discount if your spouse applies.
Definitions and terms may vary from company to company make sure you understand the terms and definitions. Read and understand the fine print.
The rules for eligibility to collect benefits may vary from company to company make sure you understand the requirements.
Do not be afraid to ask questions. There are no silly or dumb questions.
Take your time making your decision.