Long-Term Care Insurance
Long-term care insurance is one of the least understood types of insurance, yet it is one of the most important. People often pre-maturely dismiss the idea of long-term care insurance by saying “it won’t happen to me”, “I don’t want to live in a nursing home”, or “Medicare will cover me”. All of these statements demonstrate the confusion surrounding long-term care insurance.
The fact is, we are living longer lives. Medical issues, however, often arise out of this longevity. Studies indicate that over 50% of the population will need long-term care sometime in their lives. Long-term care is not just for older people. Younger people are increasingly dealing with this issue because of cancer, strokes, Parkinson’s disease, multiple sclerosis, and accidents.
For most people, a nursing home is the last place they want to be to receive care. Fortunately, there are many options available for long-term care, so often, a nursing home is the last place they would go. Home health care and assisted living facilities are often much more comfortable and appealing choices. Long-term care insurance can help you preserve these options.
Medicare generally does not pay for long-term care. Medicare only pays for skilled nursing in a home or facility that is medically necessary. Most long-term care is not skilled care though; it is custodial (non-skilled) care. Custodial care is care that helps people with their activities of daily living like bathing, dressing, and using the bathroom. Medicare does not pay for custodial care.
Long-term care is expensive. It could cost you $25,000/year just to have a home health aide visit you for 2 hours/day. An assisted living facility could cost you about $36,000/year and a semi-private nursing home facility could cost about $64,000. These figures are just averages. There are big variances between the cost of the high and low service providers.
There are several ways to pay for long-term care.
- Self-insure: People with substantial assets or incomes can pay for it out of their own pocket.
- Family assistance: People can combine their own resources with financial assistance from their family to meet their obligations.
- Government: People can spend down all their assets and then qualify for Medicaid (welfare)
- Insurance: People can decide to transfer some of the risk of needing long-term care to an insurance company by buying an insurance policy.
Long-term care insurance can help you maintain your independence, your standard of living, and avoid being a burden to family. It can protect your current assets and your future estate. Most importantly, it can give you a choice among caregivers and your level of care. Long-term care is an important consideration of every retirement plan.