Do You Need Long-term Care Insurance?

Russell Gartz

Physician's Money Digest, October31 2003, Volume 10, Issue 20

A hundred years ago, people didn't worryabout what would happen to them if theybecame sick and couldn't care for themselves.With many generations of familyliving together, there was always someone to care forthe elderly or the disabled.

But today, families are scattered throughout thecountry, with some members relocating to full-time jobsin other places. Those who once may have been caregiversnow have full-time jobs of their own and areunable to provide care because of distance and time constraints.Those who can't care for themselves must relyon paid professionals.

Those in Need of LTC

A person age 65 faces a 40% lifetime risk of enteringa nursing home. According to the Health InsuranceAssociation of America, for a woman age 65, the risk is50%. The likelihood of needing nursing home caregrows as an individual ages. With nursing home costsaveraging $50,000 per year (and more than double thatin some regions of the country), who will pay if you ora loved one can no longer take care of basic needs?

Many people mistakenly think that Medicare willcover their bills if they must go into a nursing home orhave care at home. But Medicare pays for such care onlyin limited situations (eg, in a skilled nursing facility afterhospitalization)—and only for a limited time. Medicaredoes not pay for personal care, such as assistance inbathing, at home or in a facility.

Qualifying for Medicaid, which does pay for nursinghome care, requires spending most of a patient'sassets. And those on Medicaid have few choices as tothe type of care they prefer, the Department of Healthand Human Services, Centers for Medicare andMedicaid Services says.

Recognizing the Options

Except for those who can afford long-term care(LTC) out of pocket, LTC insurance is the only way tosecure the choices of LTC that are best for you or yourloved ones. For example, many people prefer the freedomof receiving care in their own homes rather thangoing to a nursing facility.

LTC insurance can cover the costs of home healthcare workers, including nursing care, assistance withbasic activities, physical therapy, and other services. Itcan also cover adult day care services and even informalcare from a friend or family member.

If out-of-home care is the better choice, LTC insurancecan help pay for the assisted living facility or nursinghome of your choice. Deciding whether or not topurchase LTC insurance is a personal decision. LTCinsurance may be a consideration for those who havesufficient assets to protect, who want to minimize theirdependence on family members and control where andhow they receive LTC services.

According to the AARP, a general rule of thumb isnot to buy an LTC policy if you will spend down yourassets (excluding your home) within 6 to 12 months,qualifying you at that point for Medicaid benefits.

Lowering the Costs

Unfortunately, many people don't even think aboutLTC insurance until they need it, but by then, it's toolate. The costs of LTC insurance will vary, depending onyour age when you first purchase it and the extent ofyour coverage. The best time to think about buying LTCinsurance is in your 50s, when annual premiums are relativelylow. Those who wait until they're in their 70s willpay far more—assuming they're still in good physicalcondition and eligible for coverage. Those over age 85 orwho have serious medical conditions probably won'tqualify for any LTC insurance.

Other factors that will affect the price are theamount of the daily benefit, which can range from $50to $400 per day, and the benefit period. While an unlimitedbenefit period is available, most people choose a limitedbenefit period as the most cost-effective. In its 2002Comprehensive Brochure, the California Partnership forLong-term Care shows that, on average, 55% of thosewho go to nursing homes stay 12 months or more and21% stay 5 years or more.

Guide to Long-term Care Insurance

You can learn more about LTC insurance by obtaininga free from theHealth Insurance Association of America at 888-869-4078 or www.hiaa.org/consumer/guideltc.cfm.

Russell Gartz is a New Jersey–based registeredrepresentative of AXA Advisors, LLC, memberNASD, SIPC. He welcomes questions or commentsat 732-452-7256. This article was providedby the Retirement Benefits Group, a division ofAXA Network, LLC, in Edison, NJ.