Do We Need Long Term Care Protection?

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Long Term Health Care Insurance

In most age groups, the likelihood of disability ‐ being incapacitated due to illness or accident ‐ is greater than the likelihood of death.  For younger people, disability insurance, often provided by employers, is used to protect their greatest asset: the ability to earn an income.

For a retiree, Long Term Care Insurance (LTC) is the equivalent to disability insurance for someone who is still working.   LTC insurance most often covers home care, adult day care, assisted living and nursing home stays.

The cost of a stay in a nursing home is very expensive; in fact, the average Peoria area nursing home stay is approximately $71,358 per year according to Genworth.   An extended stay can put your financial assets in jeopardy.  That is, you may need to deplete your nest egg to pay for a stay in a nursing home, or have extended home health care services.

Consider the following facts:  According to the U.S. Department of Health and Human Services, 43% of those turning age 65 (more than 50% of women and nearly 33% of men) will require long term care in a nursing home during their life.  Seventy percent of all couples can expect at least one partner to use a nursing home after age 65.  As of 2009, according to surveys conducted by MetLife Mature Market Institute, the average cost of a one‐year nursing home stay in a private room grew more than 3% to $79,935.  National averages for a semi‐private room grew even faster at 3.7% to $72,270 average.   Medicare covers only about 3.6% of all long term care costs, because it provides limited coverage for SKILLED nursing care only.    Unfortunately, more than 90% of individuals currently in nursing facilities are receiving CUSTODIAL care, for which Medicare pays nothing.

Over 70 percent of single individuals and 50 percent of couples with one partner in a nursing home are impoverished within a year. Forty percent of people over age 65 risk entering a long term care facility, half of whom will stay six months or less, and the other half of whom will stay an average of 2.5 years. Clearly, the risk of a long term confinement in a nursing facility is one of the greatest hazards faced by today’s retiree.  These facts explain the growing popularity of LTC insurance policies.

Long Term Care Policy Pays for (levels of care) is a crucial factor in choosing coverage.  There are actually four categories:  “skilled care,” “intermediate care,” “custodial care,” and “home health services.”  When affordable, coverage should be obtained that provides for all levels of care. The Benefit amount and duration should be evaluated according to the projected need, and the ability to pay for the care from other sources.  The length of time the policy pays benefits can range from a number of months to life.  The benefit period should cover a majority of likely admissions.  With the average nursing home stay exceeding 2.5 years, a benefit period of 4 years is often recommended.

Remember to plan for inflation, especially if you are in you 50s through early seventies.  This can be done with an “inflation rider” to increase the benefits of the policy as time passes.

As important as the benefits are the triggers to make the policy benefits payable.  These are often, bathing, dressing, eating toileting and continence.  Be sure to ask for professional advice when reviewing the triggers.  All policies are not the same. For example, bathing is often the first activity of daily living that is unable o be performed without supervision.   If bathing is not included in the triggers, the policy is less likely to pay your benefits as you age and need help.

These LTC products are also very specialized and vary greatly company to company.  Again, seek professional advice.

Written by

Steven A. Buttice is the president of Medical Reimbursement & Management Services, Inc., a firm specializing in issues affecting seniors, including seminars and consultation on Medicare Plans, Long Term Care and other types of insurance, claims issues, and sales/service of insurance products since 1984.

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