Long-term care (LTC) is the help someone needs when they no longer are able to perform activities usually associated with independent living. Long-term care insurance (LTCI) can help provide financial independence by helping to preserve retirement assets and allowing people to receive care where they want it most, in the home. A quality LTC contract will also provide for care in assisted living facilities, nursing homes, other community-based facilities such as adult daycare centers. LTC is generally defined as assistance provided for what is known as the activities of daily living (ADL): bathing, dressing, eating, toileting, transferring from one point to another (such as from a bed to a chair), and continence. The ADL’s also include care for cognitive impairment from dementia as well as from Alzheimer’s disease.
Roughly 70% of people 65 years of age and older will require at least some type of LTC at some point in their lives (footnote 1). Common reasons for requiring LTC are accidents, chronic or disabling illnesses (e.g., cancer, Parkinson’s disease, stroke).
Generally, individuals and family members pay for part or all of the costs of LTC from their own funds whether it be from earnings, savings or investments which may have been intended for use in retirement.
Medicare coverage for LTC requires at least 3 days of hospitalization before entering a skilled-nursing facility. The facility must be a Medicare-approved, skilled-nursing facility only. After fulfilling the required minimum of 3 days of hospitalization, Medicare will then pay 100% of care in a skilled-nursing facility, in a semi-private room only. Then from days 21-100, you would pay (coinsurance) $164.50/day with Medicare paying any costs above that. But beginning with day 101, all costs would be your responsibility (footnote 2).
The National Association of Insurance Commissioners (NAIC) (footnote 3) recommends that people should NOT buy LTCI if they cannot afford the premiums, have limited assets, if Social Security Insurance is the only sources of income, or is on Medicaid (or a state variation, such as Medi-Cal). A person SHOULD consider buying LTCI if they have significant assets and income, want to protect their assets and income from the impact of the cost of potential care, can afford premiums and possible premium increases, want to stay independent of the support of others (friends and family), want the flexibility to choose care in a setting that they prefer.
Questions to ask yourself: · Have I personally been affected by LTC issues? · Have I discussed how an LTC crises may affect me (and my standard of living)? · Have I brought my trusted advisors into the decision-making process (e.g., estate attorney, accountant, spouse, my adult children)? · Have I made financial preparations for LTC? Are these plans included in my will?
1 AARP Bulletin: 10 Misconceptions About Long-Term Care Insurance
2 www.medicare.gov, 3 A Shopper’s Guide to Long-Term Care Insurance, NAIC, Page 8.
Call Benefits West so that we can discuss long-term care issues with you and help build a plan to help protect your retirement assets from potential long-term care costs.
