You might be years and years away from worrying about long-term care but that may not be as true for your parents. They may be part of the 37 million Americans who were 65 or older in 2005 and are now in their mid-70s. The number of Americans over age 65 who required long-term care in 2012 was 9 million and 12 million Americans are expected to require long-term care in the year 2020. Almost 70% of those who turn age 65 will require long-term care at some time in their lives.
What is long-term care?
The term long-term care includes a number of different supports and services. Surprisingly enough much of the long-term care is assistance with the personal tasks of life and not medical care. These personal tasks are usually called Activities of Daily Living (ADL’s)’s and include:
- Using the toilet
- Caring for incontinence
- Transferring from bed to chair or chair to bed
There are also supports and services titled Instrumental Activities of Daily Living (IADLs). This includes
- Money management
- Fixing meals and cleaning up after them
- Taking prescriptions
- Grocery and clothes shopping
- Using the telephone or computer
- Pet care
How long-term care is paid for
There are a number of misconceptions about who pays for long-term care. While you might think that you or your parents or grandparents would be covered by Medicare for long-term care this is true only if skilled services or rehabilitative care are required in a nursing home for a maximum of 100 days. However, be aware of the fact that the average stay in a nursing home covered by Medicare is just 22 days.
Medicare will also cover long-term care if you or your parent is at home and receiving skilled health or other skilled in-home services. But in general long-term care is provided only for a short period of time. Also, Medicare will not pay for non-skilled assistance with Activities of Daily Living and this is what makes up the bulk of long-term care services. The net/net of this is that you or your parent will have to pay for long-term care services that are not covered by a private or public insurance program.
Medicaid and long-term care
Medicaid will pay for the largest majority of long-term care. However, to qualify you or your parents’ income must be less than a specified level and, in addition, you must meet certain minimum eligibility requirements as established by your state. These requirements are based on the amount of assistance you need with Activities of Daily Living. The Older Americans Act and the Department of Veterans Affairs will also pay for long-term care services but only in certain circumstances and for specific populations.
What is long-term care insurance?
Long-term care insurance is unlike traditional health insurance. It’s designed specifically to cover long-term supports and services including custodial and personal care in your home, a community organization or a facility. The way it works is that it reimburses the policyholder a daily amount (to a limit you select) to pay for services that will help with the activities of living such as dressing, eating or bathing. When you purchase a long-term care policy you usually can select from a range of benefits and options designed to get you the services you need and where it is you need them.
What long-term care insurance costs
It’s impossible to say exactly what long-term care insurance would cost you or your parents. This is because it’s based on your age when you get the policy, the maximum amount that the policy will pay your per day and:
- The maximum days (years) that a policy will pay
- Any optional benefits you select, such having your benefits increase with inflation.
- The lifetime maximum amount the policy will pay is determined by number of days times the amount per day
Note: Be aware that if you are already getting long-term care services or are in generally poor health you may not qualify for long-term care insurance. The reason for this is that most policies include medical underwriting. This is an insurance term that generally means an in-depth analysis of your health information.
However, there are instances where you could buy a reduced amount of coverage or you might be able to get “non-standard” rate coverage. And there are group policies, which do not require medical underwriting.
One option to pay for long-term care is by getting a reverse mortgage. This is where instead of making a mortgage payment every month, your mortgage company pays you. You could then use the money to pay for your long-term care. You’re usually not required to pay back this money so long as you live in your home. The loan is repaid when you die, sell your home or when it’s no longer your primary residence.
A second way to pay for long-term care is with a home equity loan or homeowner’s equity line of credit (HELOC). However, most experts say this is a really bad idea because you don’t want to take out a home loan to pay medical debt. The reason for this is because it would put your house at risk.
It’s also possible that you could have an annuity or a trust that would pay for your long-term care. Barring this, your final option would be to file for bankruptcy. For example, if you had a $20,000 bill for your long-term care and you simply don’t have the money, then you might consider filing for bankruptcy. While this would put a stain on your credit report for up to 10 years, you might be in a position where you might not care.
Getting the best deal on long-term care insurance
The way to get the best deal on your long-term care insurance or insurance for your parents is to pick a shorter benefit period. The vast majority of your long-term care needs would be covered by a benefit period of three to five years. Another effective way to cut the cost of long-term care insurance is to choose a lower level of protection against inflation. However, some financial experts worry that if you were to choose an inflation protection of 3% of or less this will not keep up with rising long-term care costs. Finally, the best solution is to buy early. The best time to buy long-term care insurance would be while you’re in your 50s. And, of course, it’s better to buy when you’re in good health. One quarter of people aged 60 to 69 applying for long-term care insurance are rejected and 44% of people aged 70 to 79 are denied coverage. And if you are over age 75, most companies simply won’t issue you a policy.