The first step in talking about long-term care (LTC) is to define what it is, and what it is not. LTC, by definition, is what is required when someone is no longer independent and needs chronic care assistance of 90 days or more. A person may need LTC because of a cognitive impairment such as dementia, Alzheimer’s, or senility, or because of aging, such as needing assistance with bathing, dressing, eating and other activities of daily living where musculoskeletal issues, imbalance problems, or other health conditions precipitate the need for caregiving and help.
LTC does not, however, necessarily mean someone is fully disabled or incapacitated and requires nursing home care. In fact, only about 20 percent of LTC requires skilled care and if someone doesn’t need skilled care, they usually don’t need to be in a nursing home. As someone gets older, weaker and frailer, they may only need supervision getting in and out of a shower or tub and help with dressing. As a testament to this, over 75 percent of LTC carrier claims are paid to provide care in the privacy of a care recipient’s home.
What is long-term care insurance or LTC financial plans and what do they cover?
Traditional LTC insurance provides benefit coverage by transferring LTC risk to an insurance carrier. The carrier charges an annual premium to maintain that risk and provide LTC benefits and coverage in the form of payment for caregivers.
A comprehensive LTC plan pays for home care, facility care (assisted living or nursing home), adult day care, homemaker services, caregiving training, claims-processing assistance, coordination of care and free choice in care facility selection or home health care selection. There are also “hybrid” LTC financial plans that combine life insurance or annuities with LTC insurance and linked benefit plans that allow access to a life insurance death benefit if used for LTC.
Every household is different and it’s important to know how LTC plans differ to determine an optimized solution in meeting a household’s objectives. The primary goals are usually maintaining independence and access to quality care, mitigating the high costs of LTC, eliminating concerns of outliving savings, avoiding family burden and/or welfare and maximizing legacy.
Who should consider planning for LTC?
Although LTC insurance or financial products for LTC planning may not be financially suitable for everyone, it is wise for everyone to plan for LTC because of the high statistical likelihood of requiring LTC once we are 65 years of age. More than 65 percent of individuals above age of 65 require LTC before death. Medicare does not pay for LTC. State Medicaid (welfare) will only pay for LTC in a nursing home and only after a spenddown of all monies to $2,000. There are also income and means testing requirements, a five-year asset transfer review and a consistent tightening of regulations to qualify for Medicaid payments for LTC. Additionally, there are filial laws that can hold family members responsible for the payback of Medicaid funds provided for LTC. However, LTC financial-planning products need to be financially suitable and affordable, and applicants must qualify through very sensitive and very unique health underwriting by the carriers.
What is the average length of time someone will need LTC and the average costs?
Statistics and studies demonstrate that average need is about 1.1 years of home care, plus 2.2 years in facility care (assisted living or nursing home care) for a combined total of about three to four years. Women typically have a higher risk of needing LTC than men and about 25 percent require over four years of LTC.
However, if LTC is a result of cognitive impairment, average need climbs to eight years of care.
The cost of care varies by care modality and need: home care, facility care, skilled or unskilled care and costs also vary geographically.
According to the most recent governmental statistics on LTC, 65 percent of individuals require LTC once over 65 years of age.
The following are national LTC cost averages for 2017:
• home health aides — $4,099/month
• homemaker services — $3,994/
month
• assisted living facility — $3,750/
month
• nursing home-private room
— $8,121/month
Keep in mind that these costs are not stagnant and have routinely doubled on the average every 10 years. Additionally, as baby boomers turn 65 at the rate of approximately 10,000 each day, the demand and supply of caregivers is expected to increase the costs of care even more aggressively. When doing the math on LTC costs, the risk and numbers become staggering.
Where can you purchase LTC insurance?
LTC plans can be shopped for online, through general insurance agents, financial planners, investment brokerage firms, estate-planning attorneys or LTC specialists. The complexity of LTC planning is a direct result of the constant flux in plans and carriers within the LTC marketplace, health-underwriting differences with each carrier, different carrier premium price break points by age, numerous financial products and their continuous evolution, changes in carrier availability in the marketplace and infinite LTC plan design capability.
Because LTC planning can be a daunting task, it’s wise to work with an LTC-planning specialist who is certified with at least three to five years’ tenure in LTC and works exclusively with LTC planning; preferably an independent agent able to represent all available LTC financial-planning products and carriers without any real bias. An LTC specialist will help muddle you through the LTC complexity in incremental steps of education, assessment, recommendations, plan design, suitability and financial budgeting. A good plan should comfortably fit the LTC risk, a household’s profile of health, finances, risk tolerance and overall objectives, as well as budgetary comfort to fund a plan today and for the duration.
What are the benefits of a company group LTC policy?
Group LTC policies can provide easier health underwriting, tax advantages, executive carve-outs and premium discounts (although usually not lower than individual plan premiums). Group LTC policies usually have limitations in benefit coverage and plan-design capability and surprisingly are usually more expensive than individual policy premiums.
Joe Celano, MBA, CLTC, CSA is based in New Orleans and has provided Independent LTC Planning Services exclusively since 1998; he is certified in LTC, a Certified Senior Advisor and is a principal owner of INTRX HealthCare which is exclusive to LTC Planning solutions in multiple states throughout the USA. He can be reached at (504) 488-3800.
