If you have personal assets to protect, now is the time to compare long term care insurance providers and policies. If there's a history of serious illness in your family, then long term care should be an even greater priority.
It's imperative to apply while you're still healthy. If down the line you become seroiusly ill without the protection of long term care, then it will be too late; no long term care provider will issue you a policy after your health has deteriorated.
Long Term Care policies are usually guaranteed renewable; once you qualify, you'll remain eligible as long as you pay your premiums. Another good reason to plan ahead: the premium is based on your age at the time you purchase the insurance, and is usually locked in for the life of your policy.
Long term care consists of many varied services for people with a prolonged illness, disability or cognitive disorder (such as Alzheimer's disease). These services are aimed at providing people with the help they need when a prolonged illness or disability inhibits their ability to care for themselves. Long term care can range from help with day-to-day activities in the home (custodial care such as dressing, preparing meals, bathing, etc.) to more sophisticated services such as skilled nursing care in your home or a nursing facility. Skilled care and personal care remain the most common terms used to describe the degree of long term care needed.
Skilled care is typically needed in cases where medical conditions call for care from trained medical personnel like registered nurses or professional therapists. Skilled care is usually ordered by a physician, and is provided 24 hours a day with a specific treatment plan. Though usually provided in a nursing home, skilled care may also be administered in other settings, such as the patient's home, with help from visiting nurses or therapists.
Personal care (also known as custodial care) helps with activities of daily living, including assistance bathing, eating, dressing, using the toilet, continence and transferring. Personal care is less intensive and complicated than skilled care and can be provided in many settings, including nursing homes, adult day care centers or at home.
If you're like most consumers, you've set aside money for a rainy day. However, you probably haven't protected your savings against the expense of an extended illness or disability. The time to take action is now, because the likelihood of needing such long term care is significant and the cost is high, and only increases with age. A study reported by the New England Journal of Medicine in 1992 anticipates that 43% of people over age 65 will enter nursing facilities during their lifetime. More than half of the people in a nursing facility stay more than one year. Currently, the cost of a year in a nursing home averages about $38,000.¹ In addition to nursing facilities, many people will need long term care services in their home, or community services in adult day care centers. It has estimated that 80% of all people age 65 will need either nursing facility services or home or community services during their lifetime.
Long term care insurance is the most efficient means of protecting your assets against the threat of extended illness. When you purchase a long term care insurance policy, not only are you helping safeguard your assets from the cost of long term care, but you increase your independence and control over future needs.
Nationally, one third of all nursing home expenses are paid out-of-pocket by individuals and their families, and about half are paid by state Medicaid programs.¹ Medicare, Medicare Supplement Plans, Medicare HMO's and traditional health insurance plans are designed to pay for hospital and doctor costs, not to pay for long term care services. In fact, Medicare pays only about 10% of all long term care costs (including only 5% of all nursing facility expenses).
A study performed by the Health Care Financing Administration, which administers Medicare, showed that the majority of nursing facility costs were paid with the personal assets of the individual receiving the care, or by Medicaid if the individual had no personal assets. To receive Medicaid assistance, you must meet federal poverty guidelines for income and assets on health care. Only after spending most of your assets will you be eligible for Medicaid. Thus, many people begin paying for nursing home care out of their own pockets and are forced to deplete their financial resources before they become eligible for Medicaid.
Without long term care insurance, care can be extremely expensive, pending the amount and type of care needed and the setting in which care is provided. The cost of a year in a nursing home averages about $38,000.¹ This cost is only an average and varies across the country. If you receive skilled nursing care in your home and are visited by a nurse three times a week for two hours per visit for the entire year, the bill would come to about $12,000.¹ If you receive personal care in your home from a home health aide three times a week for a year, with each visit lasting two hours, the bill would amount to about $8,000.¹
¹American Health Care Association study, 1993
- A Shopper's Guide to Long-Term Care Insurance , National Association of Insurance Commissioners
- Long Term Care Companion Consumer Guide, Transamerica Occidental Life.
- 77 million Americans will turn 50 over the next 18 years. That's 1 person every 7.5 seconds
- By 2020, one in three workers will require some type of eldercare
- 70% of people over 65 will need long term care services
- 43% of individuals age 65 will enter a nursing home sometime in their lifetime, with 50% staying an average of 2.5 years
- For every individual receiving care in a nursing home, there are 4 people receiving care outside a facility
- The national average cost for 1 year in a nursing home is approximately $41,000; in larger cities the number ranges between $50000 to $60,000 annually
- 50% of all couples and 70% of single persons are impoverished within one year of entering a nursing home
- The annual cost to companies for lost productivity from eldercare responsibilities is $17 billion per year, or $3,142 per employee