• Retirement and Annuity Advisor Jennifer Lang

How to purchase long-term care insurance now without risking any of your own money.

Updated: Feb 24


Long-term care (LTC) is a variety of services which help meet both the medical and non-medical needs of people with a chronic illness or disability who cannot care for themselves for long periods. Long term care is focused on individualized and coordinated services that promote independence, maximize patients' quality of life, and meet patients' needs over a period of time.


It is common for long-term care to provide custodial and non-skilled care, such as assisting with normal daily tasks like dressing, bathing, eating, and using the bathroom. Increasingly, long-term care involves providing a level of medical care that requires the expertise of skilled practitioners to address the multiple chronic conditions associated with older populations. A chronic illness may be due to a physical or a severe cognitive impairment like dementia.  


A severe cognitive impairment is a loss or deterioration in intellectual capacity or judgement which requires substantial supervision to protect a person and is measurable by clinical evidence and standardized tests that reliably evaluate short and long term memory, orientation as to person, place, or time, deductive or abstract reasoning, and judgement as it relates to safety awareness.



Where You Receive It

Long Term Care can be received in a variety of settings.  The large majority of services in the United States are received at Home.  This fact alone is the major cause of the severe consequences to families and their finances. Home Health Care services are primarily provided by unpaid family caregivers. Home health care can also be provided by professionals including social workers, homemakers, and home care aides as well as skilled providers like nurses or therapists.  


Services provided include assistance with the Activities of Daily Living (ADL's) as well as the Instrumental Activities of Daily Living (IADL).  


The ADL's include bathing, dressing, eating, toileting, transferring, and continence.  The IADL's may include cooking, cleaning, laundry, bill paying, and transportation.

  Adult Day Care Centers are a community based service that can allow the person in need to continue to live at home.  This form of care also allows the family members to have a daily respite or enables them to continue working.  Similar to a children's day care center, a family member may drop off the patient on the way to work and pick them up on the way home. Assisted Living Facilities primarily provide non-skilled full time care.  They generally provide care in a secure environment where residents live in their own apartments. The large majority of care is provided by para-professionals who are trained in assisting residents with their activities of daily living. Skilled Nursing Facilities provide skilled or rehabilitative full time care.  These skilled services are provided in more of a hospital-like setting.  Each resident may have a private or semi-private room.  The facility must have full time nurses on staff to provide the skilled care needed by the residents.


Who Pays For It

Many have discovered that there are only two ways to pay for long term care services; Out of your retirement savings or with private long term care insurance. Most can't depend on the following government programs: Medicare This is an entitlement program that provides health insurance for people age 65 and older.  Medicare and health insurance does not cover most long term care expenses. Medicare requires that you need skilled care and that it is rehabilitative in nature.


Most long term care is custodial care which is assistance with your activities of daily living, not skilled care.  Medicare also requires that you continue to show improvement and provides services that are rehabilitative in nature.  The very definition of a Chronic Illness that requires long term care is that it does not improve.   Medicaid This is a Needs Based program with strict financial requirements including asset and income limits.  Most of your assets and income must first be spent on your own care until you reach these limits.  Once you reach these financial limits set by your state, ($2,000 in assets in most states) Medicaid can pay for your care in a nursing facility. Medicaid generally does not pay for home care.  This is not a good planning option for those who do not want to become impoverished if care is needed. Veteran's Benefits The VA does offer veterans some extended-care services in some circumstances. However, access is not universal. Most long-term services (those expected to continue beyond 180 days) are generally available only to veterans who either have severe service-connected disabilities or pass strict means tests on their income and assets.


Services are often not available everywhere, have long waiting lists, or are otherwise difficult to get into. In sum, VA extended care benefits are usually not relevant to any client who was not severely disabled in the line of duty and whose goal is to avoid becoming impoverished if care is needed.  


Cost of Care

The cost of care varies based on the care setting, geographic location, and level of care required.  Below you will find the national averages by care setting for 2019. These numbers vary greatly by state.  Home Health Care The average cost for homemaker services is $4,290 per month.  This assumes 44 hours per week of services.  Homemaker services include assistance with things like house cleaning, cooking meals, and running errands.  The average cost for a home health aide is $4,385 per month.  


This assumes 44 hours per week of services.  A home health aide provides assistance with your activities of daily living (Bathing, Dressing, Eating, Toileting, Transferring, and Continence).  The average cost for skilled nursing care at home is $87.50 per visit.   Adult Day Care The average cost for Adult Day Care is $1,625 per month. Assisted Living Facility The average cost for an Assisted Living Facility is $4,051 per month.   Skilled Nursing Facility The average cost for a semi-private room in a skilled nursing facility is $7,513 per month.  The average cost for a private room is $8,517 per month.  


Stand-Alone LTC Insurance Stand-Alone or Traditional LTC Insurance is what most people think of when long term care insurance is discussed.  This type of insurance provides only long term care benefits and therefore, will generally provide more benefits than other types of hybrid coverage available in this market.  If the policyholder requires long term care services in the future, benefits will be paid to cover those expenses up to the maximum benefits allowable in the policy.  


Premiums are generally paid over the lifetime of the policyholder and can be increased by the insurance company. Premiums may be waived when care is received.


Premiums are not returned if care is never needed. This type of coverage is designed to pay a monthly benefit to reimburse the policyholder for qualified long term care expenses when care is needed.   Most policies offer between $1,500 - $10,000 per month in benefits.  These monthly benefits will be paid until the total maximum benefits purchased in the policy are exhausted.  Most policies will offer between $36,000 - $750,00 in total maximum benefits payable.  The types of care covered include home health care, adult day care, as well as assisted living and nursing facilities.  

PROS & CONS Stand Alone or Traditional Long Term Care Insurance is an excellent solution for those who want to get the most long term care benefits for their money and who are healthy enough to pass the medical standards.

Pros

  • You will receive the most long term care benefits for your premium initially.

  • Married individuals will receive premium discounts and can share benefits with their spouse.

  • You will receive asset protection from your state's Medicaid spend-down requirements if you ever exhaust the benefits in your coverage.

  • Premiums are waived once you qualify for benefits.

Cons

  • Premiums are not guaranteed and can rise over time.

  • If you never need long term care services you will not receive any benefits from your coverage.