Long Term Care Options

According to the government, 70 percent of people turning age 65 can expect to use some form of long-term care during their lives. Most of the care they receive comes from unpaid caregivers (generally family members or friends). In fact, a whopping one in four adults (over 65 million people) are covering about 80 percent of homecare needs and they typically spend 20 hours providing that care. Those who require more care than family members can address—and who have limited resources — may qualify for coverage through Medicaid, which is a joint federal and state program that helps pay for certain health services. If you qualify for Medicaid, you may be able to get government assistance for nursing home care or other health care costs.

Others who do not qualify for Medicaid may be shocked to learn that Medicare and most health insurance plans, including Medicare Supplement Insurance (Medigap) policies, don’t pay for more advanced services, sometimes called “custodial care”. Once they discover that they may be on the hook for covering the long-term care costs, some consumers turn to elder care lawyers to create and employ strategies, which would allow them to qualify for Medicaid in the event of a long-term illness. But in many cases, these expensive options can be unnecessary.

While there are plenty of stories about families that are forced to spend down a large chunk of their nest eggs on long-term care expenses, those cases may be rarer than you think. Most advanced care is provided by licensed home health aides, who charge $20 per hour, according to Genworth Financial’s Cost of Care Survey for 2015.

The real financial burden occurs if you need to enter a facility. Genworth found that the national median cost for a semi-private room is $80,300 (a private room costs $91,250). Those who want to protect against the massive cost of care often turn to long-term care insurance (LTCi), but not everyone needs insurance. If you have a total net worth, including a house, between $300,000 and $1.5 million, you may want to consider purchasing some baseline LTCi coverage. (Those below $300,000 can rely on Medicaid, while those above $1.5 million can self-insure.) Couples within the range are especially vulnerable, because a sick spouse can eat into assets that would dramatically change the healthy spouse’s life in the future.

I mention baseline coverage, because LTCi policies can be expensive. So instead of trying to insure the total nut, it can sometimes make sense to purchase a policy that covers some of the costs for a specific amount of time. (Statistically, women need care for 3.7 years, men for 2.2 years and one-third of today’s 65 year-olds may never need long-term care support at all.)

If you are going to purchase policy, you should make the commitment to keep it Unfortunately, a recent study from The Center for Retirement Research (CRR) at Boston College found that more than a third of those with long-term care insurance at age 65 will let their policies lapse at some point, forfeiting all benefits. Lapses could be due to the burden of insurance premiums, a late in life bet that care is no longer necessary, or worse yet, poor decisions due to declining cognitive ability. For this last group of lapsers, having insurance could be counterproductive as they buy it to protect against risk but drop it just when the risk becomes more likely.

Many insurers no longer offer this product, because it is so difficult to predict how many people will need long-term care and what the cost of that the care might be.  Unfortunately, the more insurance companies that exit the LTC business, the fewer options there are for consumers. Some of the highly rated companies that are still committed to offering LTCi include: Genworth, John Hancock, Mutual of Omaha, MetLife, MassMutual, New York Life and Northwestern Mutual.

Long-Term Care Awareness

November is Long Term Care Awareness month, which gives me an opportunity to discuss this important subject. I know people hate thinking about getting old and sick, or becoming a burden, but not addressing the issue could have a significant impact on your life and the lives of your family. According to the 2014 Medicare & You, National Medicare Handbook, at least 70 percent of people over 65 will need long term care services and support at some point in their lifetime. Unfortunately, many do not realize that Medicare and most health insurance plans, including Medicare Supplement Insurance (Medigap) policies, don’t pay for this type of care, sometimes called “custodial care.”

Only those with limited resources qualify for coverage through Medicaid, which is a joint federal and state program that helps pay for certain health services. If you qualify for Medicaid, you may be able to get government assistance for nursing home care or other health care costs.

And those costs are breathtaking. Genworth Financial’s Cost of Care Survey for 2014 shows that prices for care have steadily increased, though the cost of facility-based providers has grown at a much greater rate than that for home care. In 2014, the national median cost for a private room in a nursing home was $87,600 (prices vary widely across the country), which represents a 4.19 percent compound annual growth rate over the past five years – that’s more than twice the annual rate of inflation during the same time period of time. (Note: bunking up doesn’t save as much as you might think: the cost of a semi-private room is a whopping $77,380.)

If you don’t need a facility, care is more affordable. The national hourly median rate for a licensed home health aide rose by just 1.32 percent annually over the past 5 years to $20. The slower rate of inflation is attributed to increased competition among agencies and the wider availability of unskilled workers.

Everyone has heard stories about folks who plow through all of their savings, due to an extended illness, but the cost of protecting against that potential liability possibility can be steep. According to the American Association for Long-Term Care Insurance, a typical long-term care policy for a 55-year-old couple costs about $4,000 and about 15 percent of people in their 50s get declined for long-term care insurance.

Who needs long-term care insurance (LTCi)? Generally, speaking, those who have a total net worth, including a house, between $300,000 and $1.5 million may want to consider purchasing some baseline coverage. (Those below $300,000 can rely on Medicaid, while those above $1.5 million can self-insure.) Couples are especially vulnerable, because a sick spouse can eat into assets that would dramatically change the healthy spouse’s life in the future.

I am often asked about specific companies that provide LTCi coverage. Many insurers no longer offer this product, because it is so difficult to predict how many people will need long-term care and what the cost of that the care might be.  Unfortunately, the more insurance companies that exit the LTC business, the fewer options there are for consumers. Some of the highly rated companies that are still committed to offering LTCi include: Genworth, John Hancock, Mutual of Omaha, MassMutual, New York Life and Northwestern Mutual.

Long-Term Care Update: Is 90 the new 70?

Americans are getting older. A new U.S. Census Bureau report projects that roughly one in five Americans (about 21 percent) will be 65 years old and up by 2050, compared with just 13 percent in 2010 and less than 10 percent in 1970. Taking a longer view, the numbers are startling. According to the 60 Minutes segment, Living to 90 and Beyond, “Since the start of the 20th century, we have increased life expectancy in this country by a remarkable 30 years -- from just 49 in 1900, to almost 79 today…Men and women above the age of 90 are now the fastest-growing segment of the U.S. population.” Of course, the key is to live longer with good health and that goal is a tough one to achieve. According to the 2014 Medicare & You, National Medicare Handbook, at least 70 percent of people over 65 will need long term care services and support at some point in their lifetime. Unfortunately, many do not realize that Medicare and most health insurance plans, including Medicare Supplement Insurance (Medigap) policies, don’t pay for this type of care, sometimes called “custodial care.”

Only those with limited resources qualify for coverage through Medicaid, which is a joint federal and state program that helps pay for certain health services. If you qualify for Medicaid, you may be able to get government assistance for nursing home care or other health care costs.

And those costs are breathtaking. Genworth Financial’s Cost of Care Survey for 2014 shows that prices for care have steadily increased, though the cost of facility-based providers has grown at a much greater rate than that for home care. In 2014, the national median cost for a private room in a nursing home was $87,600 (prices vary widely across the country), which represents a 4.19 percent compound annual growth rate over the past five years – that’s more than twice the annual rate of inflation during the same time period of time. (Note: bunking up doesn’t save as much as you might think: the cost of a semi-private room is a whopping $77,380.)

If you don’t need a facility, care is more affordable. The national hourly median rate for a licensed home health aide rose by just 1.32 percent annually over the past 5 years to $20. The slower rate of inflation is attributed to increased competition among agencies and the wider availability of unskilled workers.

Everyone has heard stories about folks who plow through all of their savings, due to an extended illness, but the cost of protecting against that potential liability possibility can be steep. According to the American Association for Long-Term Care Insurance, a typical long-term care policy for a 55-year-old couple costs about $4,000 and about 15 percent of people in their 50s get declined for long-term care insurance.

Who needs long-term care insurance (LTCi)? Generally, speaking, those who have a total net worth, including a house, between $300,000 and $1.5 million may want to consider purchasing some baseline coverage. (Those below $300,000 can rely on Medicaid, while those above $1.5 million can self-insure.) Couples are especially vulnerable, because a sick spouse can eat into assets that would dramatically change the healthy spouse’s life in the future.

I am often asked about specific companies that provide LTCi coverage. Many insurers no longer offer this product, because it is so difficult to predict how many people will need long-term care and what the cost of that the care might be.  Unfortunately, the more insurance companies that exit the LTC business, the fewer options there are for consumers. Some of the highly rated companies that are still committed to offering LTCi include: Genworth, John Hancock, Mutual of Omaha, MassMutual, New York Life and Northwestern Mutual.

Protecting yourself from long-term care costs

There's no denying it: Most of us are going to need some form of long-term health care during our golden years. And costs of such care are rising. Genworth Financial recently released its long-term care Cost of Care Survey for 2013, and the results are sobering. The costs of home care providers, adult day health care facilities, assisted living facilities and nursing homes have been steadily rising over the past 5 years.

However, the news is a little better if you don't need a facility. The national hourly median rate for a licensed home health aide rose by just 1 percent annually over the past 5 years to $19. This slower rate of inflation is attributed to increased competition among agencies and the wider availability of unskilled workers during the recession.

Those are the numbers, but how likely is it that you will need care? According to the U.S. Department of Health and Human Services , about 70 percent of people over age 65 will require some type of long-term care (LTC) services during their lifetime, and more than 40 percent will need care in a nursing home. Of course, your personal health history may increase or decrease your chances of needing long-term care. (One surprising fact: If you live alone, you're more likely to need paid care than if you're married or single and living with a partner. Maybe Match.com should incorporate this detail into their sales and marketing materials!)

One of the big misconceptions about LTC is that services are covered byMedicare. But in reality, Medicare only addresses short-term skilled services or rehabilitative care; it does not cover "custodial care," or assistance with activities of daily living. The only government-provided insurance that does provide LTC coverage for this is Medicaid, but qualifying for it is a doozy.

If your total net worth is below a certain level (probably around $300,000), it makes sense to rely on Medicaid for future LTC costs. However, Medicaid is a state-specific benefit, so you should visit longtermcare.gov for more information. On the other end of the spectrum, if you have more than $1.5 million, you can choose to "self-insure," where you tap into your assets to pay for care.

The folks that fall in between Medicaid coverage and self-insurance are the ones that should be considering how to protect against a long-term illness that eats away at their financial health as well. These "LTC tweeners" should consider purchasing long-term care insurance.

The biggest problem with long-term care insurance is that it is expensive. It's hard to justify spending thousands of dollars a year on insurance that you may never need. But then again, do you kick yourself for buying auto insurance and not totaling your car?

Another hurdle is that it's been hard to find a highly rated insurance company in the LTC business these days. Prudential Financial, MetLife and Unum have all decided to exit the individual long-term care insurance business. While these companies have said that they will honor all existing contracts, which will be guaranteed renewable, they will no longer write new LTC policies.

Why are these companies leaving what would seem to be a highly profitable business? The answer is clear: Insurance companies are very good at pooling and insuring certain types of risks, like homeowners and drivers, but they are less confident about projecting how many people will need long-term care and how much that care will cost.

Unfortunately, the more insurance companies that exit the LTC business, the fewer options there are for consumers. As you shop for LTC providers, stick with the highly rated companies that have a proven track record of being in the business and not hiking premiums. Check out the American Association for Long-Term Care Insurance for more information.

Getting old is hard enough as it is, but protecting yourself and your family from rising LTC costs can make all the difference in the world.

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