When planning for retirement, most of us take into account our future needs related to food and shelter and our potentially increasing medical costs due to sickness or injury. However, most Americans underestimate their risk for needing long-term care.
Long-term care becomes an issue when an individual needs supervision to ensure his or her safety or needs personal care assistance; i.e., help with activities of daily living, such as eating, bathing, dressing, using the bathroom and moving around. The need for long-term care can arise suddenly or come about gradually. Medicare and private health insurance do not cover long-term care.
Considering current demographics, long-term care is a growing social concern. In response to this reality, the Long-Term Care Financing Collaborative (the “Collaborative”) was formed in 2012 by a diverse group of national experts with a mission to improve how Americans deal with long-term care.
According to the Collaborative, there are between 10 and 12 million adults who currently need long-term care, and the number of adults needing long-term care is expected to double by the year 2030. While there is great variation among seniors in both the level of care required and the period of time that care is needed, approximately 50% of all seniors will need a high level of long-term care for two years.1
Long-term care can be delivered in the community, in the home, at an assisted living facility, or in a nursing home. The median monthly costs2 for the nation and Pennsylvania follow:
|Adult Day Care||$1,517||$1,343|
|Home Health Aide Services||$4,099||$4,195|
|Assisted Living: (one bedroom)||$3,750||$3,450|
|Nursing Home (semi-private room)||$7,148||$9,277|
|Nursing Home (private room)||$8,121||$10,007|
Few people have sufficient savings to cover the costs of long-term care. Rather, many must rely on unpaid family caregivers, or are forced to turn to Medicaid provided they are eligible for benefits, if they do not have adequate private long-term care insurance.
Long-term care insurance policies pay for personal care services up to a set limit once the insured shows that he or she meets the policy’s eligibility criteria for payments. Policies vary in how and where benefits can be used.
There are also different types of long-term care insurance policies to consider. For example, there are traditional standalone policies where the premiums payments are “lost” if long-term care is not needed. Alternatively, there are policies that include a return of premium feature at some level. This feature, payable as a death benefit to the policyholder’s beneficiary, adds to the cost of the policy. Lastly, there are hybrid policies that combine long-term care insurance and life insurance. These combination policies are suitable for individuals who have a need for life insurance and also want long-term care protection.
If you are concerned about long-term care and need assistance, please think of us. With proper preparation, you can avoid the financial and emotional stress that comes with crisis planning and lessen possible burdens on your family. We can help with determining your eligibility for benefits, creating or reviewing caregiver arrangements, or understanding available options related to asset titling and transfers, including the use of trusts, for the purpose of preserving funds.
1 Full report: www.convergencepolicy.org/wp-content/uploads/2016/02/LTCFC-FINAL-REPORT-Feb-2016.pdf
2 Genworth Cost of Care Survey of 2017: genworth.com/about-us/industry-expertise/cost-of-care.html