Long-term
care refers to the ongoing services and support needed by people who have
chronic health conditions or disabilities. There are three levels of long-term
care:
Skilled
care: Generally round-the-clock care that's given by professional health
care providers such as nurses, therapists, or aides under a doctor's
supervision.
Intermediate
care: Also provided by professional health care providers but on a less
frequent basis than skilled care.
Custodial
care: Personal care that's often given by family caregivers, nurses'
aides, or home health workers who provide assistance with what are called
"activities of daily living" such as bathing, eating, and dressing.
Long-term
care is not just provided in nursing homes--in fact, the most common type of
long-term care is home-based care. Long-term care services may also be provided
in a variety of other settings, such as assisted living facilities and adult day
care centers.
2. Why
is it important to plan for long-term care?
No
one expects to need long-term care, but it's important to plan for it
nonetheless. Here are two important reasons why:
The
odds of needing long-term care are high:
Approximately
40% of people will need long-term care at some point during their
lifetimes after reaching age 65*
Approximately
14% of people age 71 and older have Alzheimer's disease, a disorder that
often leads to the need for nursing home care**
Younger
people may need long-term care too, as a result of a disabling accident or
illness
The
cost of long-term care is rising:
Currently,
the average annual cost of a 1-year nursing home stay is $72,270* and in many
states the cost is much higher. In the future, long-term care is likely to be
even more expensive. If costs rise at just 3% a year (a conservative estimate),
in 20 years, a 1-year nursing home stay will cost approximately $130,528.
*National
Clearinghouse for Long-Term Care Information, U.S. Department of Health and Human
Services, 2009
**Alzheimer's
Association, 2009
3. Doesn't
Medicare pay for long-term care?
Many
people mistakenly believe that Medicare, the federal health insurance program
for older Americans, will pay for long-term care. But Medicare provides only limited
coverage for long-term care services such as skilled nursing care or physical
therapy. And although Medicare provides some home health care benefits, it
doesn't cover custodial care, the type of care older individuals most often
need.
Medicaid,
which is often confused with Medicare, is the joint federal-state program that
two-thirds of nursing home residents currently rely on to pay some of their
long-term care expenses. But to qualify for Medicaid, you must have limited
income and assets, and although Medicaid generally covers nursing home care, it
provides only limited coverage for home health care in certain states.
4. Can't
I pay for care out of pocket?
The
major advantage to using income, savings, investments, and assets (such as your
home) to pay for long-term care is that you have the most control over where
and how you receive care. But because the cost of long-term care is high, you
may have trouble affording extended care if you need it.
5. Should
I buy long-term care insurance?
Like
other types of insurance, long-term care insurance protects you against a
specific financial risk--in this case, the chance that long-term care will cost
more than you can afford. In exchange for your premium payments, the insurance
company promises to cover part of your future long-term care costs. Long-term
care insurance can help you preserve your assets and guarantee that you'll have
access to a range of care options. However, it can be expensive, so before you
purchase a policy, make sure you can afford the premiums both now and in the
future.
The
cost of a long-term care policy depends primarily on your age (in general, the
younger you are when you purchase a policy, the lower your premium will be),
but it also depends on the benefits you choose. If you decide to purchase
long-term care insurance, here are some of the key features to consider:
Benefit
amount: The daily benefit amount is the maximum your policy will pay for
your care each day, and generally ranges from $50 to $350.
Benefit
period: The length of time your policy will pay benefits (e.g., 2 years, 4
years, lifetime).
Elimination
period: The number of days you must pay for your own care before the
policy begins paying benefits (e.g., 20 days, 90 days).
Types of
facilities included: Many policies cover care in a variety of settings
including your own home, assisted living facilities, adult day care
centers, and nursing homes.
Inflation
protection: With inflation protection, your benefit will increase by a
certain percentage each year. It's an optional feature available at
additional cost, but having it will enable your coverage to keep pace with
rising prices.
Your
insurance agent or a financial professional can help you compare long-term care
insurance policies and answer any questions you may have.