Long-term care insurance typically covers the cost of help in the home with personal activities like bathing, dressing, eating, and the other ADLs, as well as homemaker chores like cleaning and bill paying; visiting nurses; community programs, such as adult day care; assisted living services typically including meals, health monitoring, and help with daily activities that are provided in special residential settings other than at home; and skilled nursing care.
Long-term care insurance is NOT life insurance or disability insurance. Ordinary health insurance and medical expense policies do not pay for LTC expenses. Medicare, under certain conditions, pays only for short-term care. Medicaid will pay for LTC when most savings and other assets have been spent down to very low levels. For these reasons, LTCI may be a viable option for many as a way to pay LTC expenses.
Who Is a Candidate for Long-Term Care Insurance?
Long-term care insurance can help protect assets against the potentially catastrophic cost of extended long-term care by providing the funds to meet LTCI expenses when the time comes. However, long-term care insurance is not for everyone. It usually makes sense only for those who have significant assets to protect. It is probably not wise for those on fixed or low incomes or those who have trouble stretching their money to pay for utilities, food, and medicine. People who have only modest levels of assets may have no choice but to spend down to qualify for Medicaid.
LTCI coverage can be very expensive. In some cases, insured's pare down the coverage to obtain a policy they can afford and then later discover their benefits are not adequate to pay a significant cost of the care. Also, because LTCI premiums are based partly on age and health, it is more expensive to buy a LTCI policy when the applicant is older and/or in poor health. This means the cost might simply be out of range for some people.
As a general guideline, the following factors indicate individuals who should consider purchasing long-term care insurance:
Those have assets they want to protect
Those who are not (or likely would not be) eligible for Medicaid
Those who are in reasonably good health and would qualify for coverage
Those who express concern about the possibility of needing long-term care
Those who can afford the coverage.
With regard to affordability, the industry guideline is that premiums
should be no more than 7 percent of one’s income.
% of Income for L.T.C.
4% to 12%
$20,000 to $35,000
2% to 7%
$35,000 to $50,000
1% to 4%
More than $50,000
1% to 3%
When to Purchase Long-Term Care Insurance
Premiums tend to increase dramatically by issue age. When we are young and healthy, it is not easy to think about the future of our health. It is even more difficult to imagine a serious illness or injury striking that could necessitate the need for long-term care. When we are strong and living well is the time to consider the purchase of long-term care insurance. The typical purchaser of LTCI is between 55 and 60, and the average issue age has been rapidly declining in recent years.
The younger the applicant is when purchasing the policy, the lower the premium will be over the life of the plan. Premiums generally remain the same each year, except when insurers increase rates for an entire class of insured's.
Types of Long-Term Care
Long-term care encompasses many levels of assistance and support. These include both medical and non-medical care. Long-term care helps to meet both health and personal needs. Whenever a chronic condition, trauma, or illness limits an individual’s ability to carry out basic self-care tasks, long-term care is generally necessary.
Though long-term care may include advanced medical care, it often consists simply of hands-on assistance by others. Those with mental disabilities may not need medical care but do require supervision and direction. Types of LTC services vary from helping a 50-year-old stroke victim relearn grooming skills to providing 24-hour skilled nursing care for a 90-year old suffering from heart failure and dementia.
Long-term care is defined as chronic care with the aim of management, control of symptoms, and maintenance of function. Chronic care differs from traditional acute care, which is medical care aimed at treating physical problems directly in an attempt to permanently cure or control them.
From a medical perspective, long-term medical care includes but is not limited to treatment for the following:
Falls, fractures, injuries, pulmonary and cardiovascular disorders, psychiatric disorders, kidney and liver malfunction, prescription drug treatment, lab work, surgeries.
Medical LTCI might include medical support services for people with degenerative conditions such as Parkinson’s disease or stroke; those with prolonged illnesses such as cancer or heart disease; or people with cognitive disorders like dementia.
Non-Medical Long-Term Care
Long-term care also has a non-medical scope. Many individuals requiring long-term care are not ill. LTC on the non-medical front is much like custodial care. It is designed to assist people with support services for daily tasks such as bathing, grooming, eating, dressing, and other similar activities. This form of long-term care may involve the most private and intimate aspects of a person’s life-personal hygiene, dressing, and toileting. These primarily “low-tech” services are designed to minimize, rehabilitate, or compensate for loss of independent physical or mental functioning. Other, less personal long-term custodial care needs may involve tasks such as preparing meals and performing household chores. Custodial care may be provided by persons without special professional skills or training. Custodial care is intended to maintain and support an existing level of well-being and to preserve health and prevent its further decline.
Nonmedical services include hands-on and standby or supervisory assistance; assistive devices such as canes or walkers, and technological devices such as computerized medication reminders and emergency alert systems that warn when a person with a disability fails to respond. Wheelchair access ramps and special shower grab bars are also examples of non-medical LTC care.
Without an elderly or disabled friend or relative, or without restricted mobility, most people take for granted routine daily activities such as getting into or out of bed, taking a shower, getting dressed, and eating meals. For someone with limited mobility or cognitive impairment, these endeavors can be serious hardships. These ordinary activities are called activities of daily living (ADLs). ADLs are the basics of self-care. The extent to which one is able or unable to perform ADLs is considered one of the most reliable ways to assess the need for long-term care services. ADLs are also a measure of one’s functional or physical capacity.
Although people of all ages may have problems performing activities of daily living, the elderly are more likely to need help with ADLs than the non-elderly. The need for assistance with ADLs is more prevalent among those over age 85.
Private insurance policies and Medicaid rely on ADL measures as triggers for benefits. An insurance policy or Medicaid guidelines will state the number of ADLs that require assistance (which is typically two out of six) for LTC benefits or payments to begin. Cognitive impairment will also trigger the need for long-term care.
A(ctivities) D(aily) L(iving) Examples
Long-Term Care Risks and Statistics
The statistics associated with the risk of needing and utilizing long-term care services are staggering. As the population ages and as life spans increase, the numbers will surely rise.
By 2030, it is projected that the number of individuals age 65 and older will be more than 71 million, almost twice the number today. According to the U.S. Department of Health and Human Services, about 70 percent of individuals over age 65 will require at least some type of long-term care services during their lifetimes, and over 40 percent will need care in a nursing home for some period of time.
Advances in Medical Technology
Medical advances have increased the number of years we live and have decreased the number of early sudden deaths. Identifying asymptomatic diseases through screening, for colon cancer, breast cancer, hypertension, high cholesterol, and osteoporosis, has helped to reduce their incidence and severity. The overall results of medical advances are that people are living longer and requiring additional years of care. Hospital stays are shorter because more services are available at home and people are surviving more accidents but not always experiencing a full recovery which creates a new group of LTC patients. Medical advances may have increased life expectancy but have not noticeably delayed the onset of illness. Declining death rates may actually increase the need for long-term care. More people are living long enough to develop age-related conditions such as dementia, or they are living longer with existing disabilities and chronic conditions.
Like medical advances and innovations, advances in technology and pharmaceuticals impact the need for long-term care. Using prescription drugs to prevent complications or to treat symptoms associated with disease has increased dramatically. These advances have not only reduced the symptoms of diseases but also have slowed their progression, thereby increasing longevity, and at the same time necessitating periods of longer care. As medical advances help people live longer, there will likely be a curve towards the greater need for long-term care.
Consumer Attitudes and Understanding
A social factor associated with the growing long-term care need is consumer awareness and attitude. In general, the public at large does not have a clear understanding of the need for long-term care, including why and how to plan for long-term care. Many will simply deny that they will need long-term care; others believe entirely incorrectly, that Social Security, Medicare, or their existing health insurance will cover the costs. They do not see long-term care as something one needs to plan for in advance, much like retirement.
The “disconnect” also explains one of the reasons why people may not consider the purchase of long-term care insurance. According to the U.S. Department of Health and Human Services, coverage purchased to cover acute care far surpassed the coverage purchased to cover long-term care whereas almost all older individuals are protected from high acute care costs through Medicare and private Medigap insurance, a very small percentage have purchased long-term care insurance.
This report cited the following as key factors in the lack of demand for long-term care insurance:
Lack of Information
Many underestimate the likelihood of requiring LTC services and the potential costs of those services.
Misperception of Public and Private Programs
Many people believe that Medicare, retiree health plans, or Medicare supplement insurance covers LTC services. False.
Delayed preparation for/Denial of long-term care needs
Many do not think about preparing for long-term care needs until the need arises. At that point, they may be too old or disabled to purchase insurance.
Long Lag time between Purchase and Benefit Payment
Long-term care insurance must be purchased before it is needed; often, this means a period of many years between purchase and when benefits are likely to be paid. Consumers prefer to spend their current dollars on coverage that provides a more near-term benefit, such as Medigap policies.
Many of today’s older consumers have low incomes and cannot afford long-term care premiums.
Perception of Need
Some consumers decide they do not need long-term care insurance because they have too few assets to protect or have family and friends available to provide care.
Despite popular demand, Long-Term Care is a growing reality.
***Medicaid pays for nearly one in five health-care dollars and one in two nursing home dollars. Medicaid has become the primary payor of LTC services.
Planning for Long-Term Care
Given the likelihood of needing long-term care and the tremendous cost that this requires, it is important that individuals plan for it. People tend not to think about becoming older and needing care, or they don’t anticipate that they will ever need care themselves and resist the idea of becoming dependent. They may believe (falsely) that Medicare or their current health insurance will cover the cost of this type of sustained and ongoing care. They may find it difficult to raise this issue with their loved ones or they may underestimate the time and toll that future caregiving will demand of their family or friends. Most are not aware of the tremendous costs of this type of care, or even how it is paid for. Some may think of long-term care simply as nursing home care, and assume that the “government” will cover the cost. Many are also confronted with conflicting financial priorities. Some people may simply not know where or how to begin planning. For every reason why people do not plan in advance for long-term care, there is a reason why they should.