You may already know someone who needs some help taking care of his or her self in the later stage of life, but the question is, “If this person doesn’t have enough or anything to pay for it, how are costs covered?” Medicare does not cover most long term care needs. For most people, they will have to deplete an otherwise well thought-through financial plan or will be fortunate to have taken out Long-term care insurance.
For those who do not know, long-term care insurance refers to the services that do not fall in the domain of regular health insurance. These services include help in doing routine daily activities like bathing, getting in and out of bed and dressing to name a few.
Imagine the later stage of your life when you have a chronic medical condition, a disability, or a disorder like Alzheimer’s disease, and you need services in your home, a qualified facility, or an adult day-care. Remember that if you have not taken out long-term care insurance, you will likely face difficulty qualifying for it when you are old or before if you need it beforehand. Add to this the fact that if you already have a debilitating condition, you cannot be approved for long-term care insurance. So, if you are physically well, this is the best time to take it out. Really the earlier the better is the best time to apply for a long term care insurance policy.
How does Long-term care insurance help people?
When you are unable to do two or more of your daily tasks on your own and need someone for it, that is when long-term care insurance comes into play. People in 70s need it the most when their bodies do not allow them to do their daily living tasks. Even a younger person can claim long-term insurance too when he or she has dementia, cancer and any other cognitive or physical impairment. So, if you are at a position when you need a helping hand for your activities, do not delay calling your agent and filing an LTC claim (you must already have a policy to do so).
The Six Activities of Daily Living
To trigger policy benefits, most standard insurance policies say you must require help with two activities of daily living. The activities for being able to meet your basic living needs include bathing, mobility activities (think getting in and out of bed), cooking, grooming (such as taking a bath), cleaning your home; and cognitive impairment.
Who needs it?
Before we answer this question, it is pertinent to mention here the fact that over 8 million Americans are protected with long-term care insurance. Add to this, 50% of the LTC holders have claimed the insurance for home care.
This is the glaring example of why long-term care insurance is mandatory for your personal financial plans and to protect your wealth for the future. In this way we can plan so you don’t outlive your money. Being able to live your golden years with what you need are why everyone must implement long term care planning at some point. Sooner is better than later. You never know what can happen to you the next moment, and what will happen to your family after this. So, the simple answer to this question is, everyone needs LTC insurance.
How much does it cost?
This is an important question, which may have been circulating in your minds until now. Well, long-term care (LTC) rates depend on various factors, which include:
- Age and physical condition: if you are young and healthy, the LTC fee will be much less as compared to when you are older and weak. So its highly advisable to take it out when you can because rates will never be cheaper
- Marital status: Married people are charged lower than the single ones via a spousal discount.
- Insurer: Cost also depends on the type or strength of insurance company you are choosing. So, it is wise to shop around before you choose. Quality is utmost importance as well to make sure your benefits will be paid when you need them. Sometimes premiums are offset by dividends.
- Level of coverage: If you opt higher limits on daily and lifetime benefits, you will be charged more. Whereas, shorter elimination periods and opting out of riders cost less. Some riders are really important though, such as home benefit which is not standard in all policies. Cost of inflation can be worthwhile too if you don’t mind the cost it’ll pay for itself as cost of care rises. Historically healthcare costs have risen at rates higher than most things.
It is pertinent to note here a comparison of costs with and without insurance for the citizens of the US in general and Los Angeles and San Francisco in particular.
Cost of care without insurance:
Long-term care insurance is not a luxury, is a necessity. Here is the cost you will pay without insurance (with insurance out of pocket costs are a mere fraction and we’ll share premiums below). Out of care costs:
- $225 a day and $6,844 per month for a semi-private room in a nursing home
- $253 a day or $7,698 per month for a private room in a nursing home
- $119 a day or $3,628 per month for care in an assisted living facility
- $20.50 an hour for a health aide
- $20 an hour for homemaker services
- $68 per day for services in an adult day health care centre
Cost of care with insurance:
Long term care insurance can vary significantly. For a single individual who is age 55, the average cost is $2,007 per year. For a couple, both of who are age 55, this cost can reach $2,466 per year. And for a couple who are age 60, the average cost is $3,381 per year.
Long-term care insurance covers all parts of living facilities and in-home care. With it, you can cover expenses for a housekeeper, in home nanny, or private-duty nurse up to seven days a week, 24 hours per day, up to the policy benefit maximum. Experts suggest buying LTC when you are young because if you buy long-term care insurance when you are young, you keep your low annual premium of $3,050 even when you are 55-years-old.
How to apply for long-term care insurance?
Now, once you have decided to protect your future with long-term care insurance, it is time to look at practical steps to apply for the insurance.
Like any type of insurance, LTC also requires you to submit an application. As it is for your long-term care, you will need to answer the medical questions as well. There are reduced questions the younger you are. As you are older, usually above age 60, which doesn’t even feel that old, right, but you’ll have the cognitive impairment questionnaire. Youd be surprised this is not a sure thing to pass. If you dont pass it, regardless of the other questions, you wont be able to get a policy.
LTC policies generally pay-out per day and include lifetime total benefits. So, before you apply for LTC insurance, make sure you know the right coverage amount to apply for. If your application is approved, the insurer issues your policy at your benefit amount and you begin paying the premiums.
To check whether your state provides long-term care insurance programs or not, check your state’s insurance department. If you have any doubt regarding LTC insurance, talk to a financial planner preferably who has gone through the certification process for long term care, like your advisors at Boracchia Wiviott Wealth Partners has; and ask whether LTC insurance is an option you can count on or not
Qualifying for Medicaid Long-Term Care
Long-term care, without insurance, is expensive. Not only are you out of pocket and thus paying for it with your after tax dollars. There isn’t tax credit unless you have spent over $7,500 and if credits help you. Thats great but what to do when you cannot afford it? Medicaid is the answer. It is a jointly funded federal and state program that provides health insurance for people with low income and limited assets. But to qualify for it, there are some requirements that everyone must fulfill in order to qualify.
A Medicaid applicant must:
- Be age 65 or older; OR
- Have a permanent disability as defined by the Social Security Administration, OR
- Be blind.
There are additional requirements too such as not having more than certain (low) thresholds of assets; and look-back provisions. But the main issue is control. Long term care insurance through the government is not as robust as health insurance or medicaid. Long term care insurance is part medicaid part state specific so here in California thats medical; and thus subject to guidelines similar to those of poverty lines.
As such, it is difficult to find a state run medical facility that is agreeable to you. And keeping couples together is nearly an impossible request. So once one spouse goes in, it is unlikely he or she will ever see his or her spouse again if they both need care around the same time. Also, during COVID-19, the unfortunate and frankly heartbreaking reality is most state funded institutions with their low funding are the ones who came down with Covid 19. The goal is that most who need care have a choice in where they receive it, and this is typically outside of any Medicaid facility.
You can also learn more about SSI benefits at SSA.gov. For state-specific Medicaid information, contact your local Medicaid agency or visit Medicaid.gov
At Boracchia Wiviott Wealth Partners, we prefer to perhaps over communicate than under. We wish you and yours the most golden retirement years. We are here to help you take out this important insurance or learn more.