Long-Term Care: A Family Crisis

Recent information supplied by The New England Journal of Medicine stated that of the “individuals that turned 65 in 1990, 43% will enter a nursing home before they die.” The number that will receive home health care is even greater. Currently for nursing home care and home health care Medicare pays about 15% of the cost, Medicaid 43%, private insurance 4.5%, and the remaining 37.5% by individuals and family members. Because of the growing numbers of individuals that will qualify for government benefits (if the system stays the same) one of two things will happen and neither is encouraging:

1. The federal government will go bankrupt, or

2. Individuals or family members will have to pay a greater portion of the long-term elderly care cost.

The late Senator John Heinz of the Select Committee on Aging said that the cost of long-term care is “the greatest threat to the financial security of middle income Americans.” A true “family crisis” is coming.

The best solution to this major problem is long-term care insurance purchased by individuals to cover the cost of home health care, adult day care, assisted living, and nursing home stays. A single long-term care policy can provide benefit payments for all of these needs and can be purchased by the individual or another family member for that individual. Like all health/life related insurance policies, the younger the insured, the lower the premiums. Purchasing a long-term care policy at younger ages (40's, 50's, 60's) is good financial planning. If you are in good health, eat a balanced diet, and exercise regularly, you will live longer. Essentially, the longer you live, the greater the chance is you will need some form of long-term care. Currently the average annual cost for nursing home care is $38,000 and comprehensive home health care is about the same.

There are a number of excellent long-term care policies for senior living options available today and you need to do your homework in selecting the right long-term policy for you or your family member. It is recommended that you first check the cost for each level of care in your local area. Call three to five of the following providers: home health care agency, adult day care center, assisted living facility, and nursing home. A professional long-term insurance agent will have these costs readily available and will save you a lot of time on this project. After you have completed this project and if you did not use an insurance agent, call a professional insurance agent that specializes in long-term care insurance. Ask that he/she provide you with information senior care policies and companies they recommend. Be sure the companies are rated “A-,” “A,” or “A+” by A.M. Best and have been underwriting long-term care policies for a number of years.

A good long-term senior care policy will provide the following benefits:

• $100 per day for home health care
• $100 per day for nursing home care, adult day care, assisted living coverage
• Three year benefit period or a “pool of money” (under age 70 unlimited benefits)
• Compound inflation protection (over age 70 simple inflation)
• First day coverage or less than 30 days (waiting period)

Be sure to keep the benefits the same or very close to the same for each policy you are comparing. You can raise or lower any of the above benefits and adjust the premiums to your budget. The “pool of money” is the best value because it will probably provide benefits longer than a set number of days. A number of companies provide 10%-15% discounts for couples that apply at the same time.

To purchase a policy like the one mentioned in the last paragraph the projected annual premiums for an individual in excellent health would be as follows:

• Age 40 - $550
• Age 45 - $610
• Age 50 - $760
• Age 55 - $860
• Age 60 - $1,130
• Age 65 - $1,570
• Age 70 - $2,020
• Age 75 - $3,300
• Age 80 - $3,600

The premiums shown for ages 70, 75, and 80 are with simple inflation protection. All premiums reflect a spousal discount. The premiums illustrated may be higher or lower depending on the state of residence. The longer you delay purchasing a policy the higher the premium and the greater the risk that your health may change and you will no longer be able to medically qualify for coverage.

Review your assets and project your monthly income after you retire. If you have less than $50,000 in assets and less than $2,140 in monthly income, you will probably qualify for Medicaid within one year and should not purchase a long-term senior care policy. If you have more assets and income, purchasing a long-term senior care policy will give you the peace of mind that you will be able to select what type of care and which facility is best for you. Don't rely on your spouse or children to be financially, physically, or emotionally able to provide you with the elderly care you may need in the future. Instead, do your planning now while you are younger, healthier, and can medically qualify for an excellent long-term care policy. You will be able to preserve your independence and avoid  a “family crisis” within your circle of loved ones. You'll be glad you did.