Long-term care insurance. Do you REALLY need it?
If you have it, will you ever use it?
Of course there’s no way to know for sure, until you do need it of course!
Here’s a well known, but much-avoided fact of life: We’re all aging.
It’s gradual, even unnoticeable, but it’s definitely happening.
A lesser-known (but equally avoided) fact of life is that approximately 69% of us who live to the age of 65.
In other words, if ever you have the inability to “perform without assistance” any two of the following “Activities of Daily Living” you are technically classified as needing long-term care:
- Bathing or Showering
- Eating (Self-feeding)
- Toileting (getting to the toilet, cleaning oneself, and getting back up)
- Transferring (the ability to walk, get in and out of bed, and get into and out of a chair)
So what can we do in our 40’s, 50’s, or 60’s to prepare for the almost 70% likelihood of our needing long-term care?
First, let me dispel the misconception that there is a Medicare “safety net” out there for us if we need long-term care someday:
Medicare does NOT provide long-term care.
Generally, Medicare does not cover custodial care if that is the only type of care that is needed.
Medicare will only offer coverage if two basic requirements are met – (1) The care is considered medically necessary, and prescribed by a licensed physician or authorized medical personnel; and (2) the care is conducted by a healthcare provider who participates in Medicare.
Medicare typically only pays for skilled care in a nursing facility that has a Medicare license, and will only cover 100 days of nursing care.
What you’re likely thinking of is MedicAID which is the government healthcare program administered by the state you live in. (Medi-Cal in California)
Do You Really Want Your Kids to Care for You?
Acknowledging that there is an almost 7 in 10 chance of you and/or your spouse needing long-term care is the first critical step towards creating a plan.
Have “the conversation” with your significant other, and with your family, about the possibility that one or both of you could need care one day.
What would your family’s response be to your aging concerns and your desire to have the discussion about them?
As you prepare to share with your family your desire for them to be part of your aging plan, ask yourself some tough questions:
Would your kids offer to care for you and your partner in your old age?
(Would you want them to?)
Would they be capable of providing any level of care that you and your partner might need one day?
I mean emotionally, physically, and financially capable?
Would any of them quit their jobs or spend the necessary time away from their families to provide your care?
Would you move in with them?
(Would you want to?)
Are they going to remodel/add an “in law” unit to accommodate your residing there?
Are you OK with your kids performing ALL of the services you may eventually require to give you a “quality of life”?
Your personal care, for example?
Most clients tell me that they would never want to burden their children with the financial and emotional stress of their care.
Note: OFTEN your kids will insist that “you don’t need long-term care insurance”, and that they will “be there to help you out” if that day ever comes.
But let’s be real. They are thinking about Mom or Dad now, in their present stage of life; healthy, vibrant, active, and independent.
You can’t blame them. It’s an emotional response.
Your kids have no idea what care-giving entails until encountering a parent who has fallen in the shower, who is incontinent, or is unable to transfer in and out of bed each day.
(And do you REALLY want them changing your Depends?)
If that day comes when you or your spouse needs care, you really have three options:
1. You can live at an assisted living or skilled nursing facility, depending on the level of care you need.
2. You can go to live with a family member and have that person take care of you.
3. You can stay at home and bring people into your home for your care.
Discussing with your family what your preference would be allows you to prepare now how that care will be paid for.
It’s never too early to have this conversation. But in many families it happens only out of necessity, at the time when a parent already needs care.
The pesky little nuance about long-term care insurance is that it can only be purchased WHILE YOU ARE IN GOOD HEALTH.
It is troubling that so many people don’t seriously consider buying long-term care insurance until they have “one foot on the nursing home’s doorstep”.
By then it is too late and they are declined any coverage by the insurance companies.
The best thing about taking care of your long-term care insurance earlier in life (besides the MUCH lower cost of premiums) is that you are doing it “from a position of power and purpose” with the knowledge that you will most likely be approved for the protection.
My Mom’s ‘Sympathy Purchase’ Turned Out to be a Really Good Decision
When I first started selling long-term care insurance in 1995, my Mom, who was 60 at the time, bought a policy. I think she was my first sale.
Note: I’m not convinced that her motive for buying that policy from me was due to her “foresight”, or from any concern that she might actually need long-term care one day.
She may have just felt sorry for her oldest son, aimlessly schlepping around in this new job, and not having made any sales yet.
Regardless of her motive, she bought a really good policy.
1995 Note-to-Self: MAKE SURE Mom’s New Policy Has A HOME CARE Benefit!
One thing Mom always told her boys was “If you ever put me in ‘the home’ I’ll never forgive you”.
And she was SERIOUS. My Portuguese grandmother, my Mom’s Mom, always told her the same thing.
So now we fast-forward twenty years from when she purchased her long-term care policy, to November of 2015…
While visiting my brother for dinner one evening, Mom had a transient ischemic attack (TIA).
Note: A TIA is a brief episode of neurological dysfunction caused by loss of blood flow (ischemia) in the brain, spinal cord, or retina, without tissue death.
In my Mom’s case the TIA has caused some memory loss of the short-term variety.
Her cognitive processes were effected enough that we were able to make a claim on her long-term care policy so that she could start receiving assistance in her home.
She now receives homecare assistance for 6 hours a day, 6 days a week.
Her long-term care policy has paid for all of her care to date so that all of her savings and IRA’s have been protected.
The cost so far has been about $4,000 a month.
She’s been receiving homecare for about 41 months now, so she’s received over $160,000 in billable services to date (May 2019) and she has been reimbursed for every penny of it.
We’ll Call It the ‘Mom LTCi Case Study’
Since her policy’s inception in 1995, Mom’s paid a little over $40k in policy premiums to the long-term care insurance company.
She “broke even” on those $40,000 in annual premiums in the tenth month of her claim.
If Mom ever requires a higher level of care, her policy will cover that as well, up to the daily benefit limit she selected in 1995.
Since she chose the inflation protection feature in her policy, her total “pot” of money available for care (which is based on her rising daily benefit limit) has increased dramatically in 24 years.
The median cost of care in the San Francisco Bay Area for residence in a skilled nursing facility in 2019 is about $12,000/month for a private room, or $9,422/month for a semi-private room.
Who Pays for Long-Term Care?
There are really only two ways to pay for long-term custodial care: Either your long-term care insurance policy will pay, you will pay out of pocket, or when your assets are depleted, your state’s Medicaid system will pay.
For Medicaid to provide your long-term care you will be required to spend all of your current assets (excluding your home) down to $2,000.
Medicaid covers long-term care as long as it is provided within a nursing facility. The requirements and services for coverage vary widely from state to state.
Homecare is typically only covered only under a long-term care insurance policy, not by Medicaid.
So Medicaid is really only there when you run out of money.
(If you’re like my other clients you probably have better plans for your life savings than to have it depleted by long-term care bills!)
Also to remember, with Medicaid (in terms of your care options) it’s NOT going to be the government asking you “what would you like?”….
It will actually be them telling you and your family “here’s what you get”.
Did you expect anything else from government healthcare?
Can You Say “Out of Pocket”?
The other option is that you can pay for your long-term care services out of your own pocket.
What level of savings do you have?
Are you at a level of assets that you might choose to self-insure–that is, pay for all of your future services yourself?
Or maybe you’d prefer that your lifetime of savings would go to your kids, rather than (potentially) years of paying for long-term care services from your own assets.
But how long could you afford $9,336/month for a private room, or $8,397/month for a semi-private room in a skilled nursing facility? (Florida)
And don’t forget that your spouse might need care sometime as well.
You could also buy long-term care insurance (if you’re healthy enough to qualify for it) and your policy will cover your long-term care services up to the benefit levels you’ve paid for.
It all gets to be a very complicated puzzle when we’re looking at different income sources, different assets; which are the best ones to use to pay for that type of that care, keeping a lot of different factors in mind which is again where my services come in to play and I can act as a guide.
It’s never to early to start thinking about long-term care insurance because:
1. The younger you are when you apply, the lower your premiums will be.
2. The earlier you start, the more the “pot” of money that will be growing when you choose to utilize the compounding/inflation protection features of the policy.
I can help you.
I’ll ask you the tough questions, to help you understand the options you have and what you can qualify for.
Sometimes kids will try and talk you out of buying a policy. I have no problem speaking with your kids if you’d like me to!
I can help them to understand why it’s in their best interests for Mom and Dad to have a long-term care policy in place.
Why being a “caregiver” is a more difficult proposition than what they think.
I’ll share with them the potential financial and emotional stresses that can be present in providing for a loved one’s care.
I’ll remind them that your preference is not to burden them and their families with their care, if that time ever came.
And with your ok I’ll also remind them that having long-term care protection protects their inheritance from being spent.
And it can go FAST!
Just know that if you are considering the purchase of long-term care insurance, a sense of urgency is necessary.
Too many people are avoiding this important discussion until their health makes them ineligible for coverage.