Ask Bob: What Do I Do About Long-Term Care?

Healthcare during the senior years, especially the topic of long-term care, has been talked about and analyzed ad nauseam. And from all the research, one thing is clear. If you need long-term care, it will be expensive in both dollars and emotions.


Here are a few of the most recent statistics about long-term care in America:

  • 70% of people turning 65 will need some type of long-term care services in their lifetimes
  • 48% of people turning 65 will need some type of paid long-term care services
  • 34% of people turning 65 will require paid long-term care for more than two years
  • 15% of people turning 65 will spend more than two years in a nursing home
  • Women needing long-term care will need it an average of 3.7 years
  • Men needing long-term care will need it an average of 2.2 years
  • 9% of residents in long-stay nursing facilities are women


And what will long-term care cost? During their lifetimes:

  • 13% of people age 65 will pay between $0.01-$50,000
  • 11% will pay between $50,000-$150,000
  • 4% will pay $150,000-$250,000
  • 9% will pay long-term care costs of more than $250,000


Breaking it down even further:

  • The estimated lifetime cost of care for someone with dementia – $321,780
  • The median annual cost for adult daycare, five days a week – $19,240
  • The median annual cost for assisted living – $51,600, and costs go up an average of 6.15% per year
  • The median annual cost for a home health aide (44 hours/week; 52 weeks/year) – $54,912
  • The median annual nursing home cost for a private room – $105,850


Costs for long-term care are constantly increasing, while the median household wealth for married people age 70 or older decreases by 21% over a nine-year period.

Without question, long-term care is expensive. Some people are fortunate to have adequate resources to pay for it out-of-pocket. For those who don’t, their only options are being cared for by family or by purchasing long-term care insurance. Some think Medicare will pay for long-term care. That is absolutely NOT TRUE.


If you want to purchase long-term care insurance there are questions to be asked.


How many years of coverage should I purchase?

While you can buy unlimited coverage, the Society of Actuaries says claims average 3½ – 4 years. The longer the benefit period and the higher the policy benefit amount, the more the policy costs.


Will policy premiums go up?

LTC policies have provisions that allow the insurance company to raise premiums as the cost of care goes up. When premiums rise, it can become too expensive for the policyholder, who has to terminate the policy and lose all the money they’ve paid into it.

For example, a recent report claims General Electric doesn’t have enough money to cover claims for its long-term insurance plans. So, GE plans to raise premiums by $1.7 billion over a ten-year period. Other LTC companies are doing the same thing.


Is a policy a cash plan (indemnity) or a reimbursement plan?

  • A cash plan pays you the entire daily benefit even if actual expenses are lower than the daily benefit.
  • A reimbursement policy will only pay the full daily benefit when the actual cost of care is equal to or great than the daily benefit.


Does the policy have an inflation rider?

Inflation riders annually increase the amount of your benefit to offset increases in the cost of care.


If I need care for a short time, does the policy reset?

A restoration of benefits rider will rest the amount you receive for your care. Let’s say your lifetime benefit is $400,000. You need long-term care and spend $200,000. If you have no more claims for a pre-determined period of time, generally 180 days, then your benefits reset to the original $400,000.


Is there a waiting period?

Most LTC policies have a waiting period. The shorter the waiting period the more expensive the policy, and you will have to pay the expenses you incur while you wait.


When is the best time to buy long-term care insurance?

The longer you wait the more expensive the premiums. The longer you wait the higher the probability that you will be denied coverage due to a health issue.

  • According to 2020 data from the American Association for Long-Term Care Insurance, more than one-third of long-term care insurance applicants are denied at age 65.
  • More than half of applications age 75 and older are denied.
  • LTC premiums increase significantly beginning in your 60’s.


Here’s an example of premiums from a Mutual of Omaha LTC calculator for a single female in Manhattan applying for coverage of $5,000/month with a benefit period of 36 months.

  • Age 45: $234 per month
  • Age 55: $293 per month
  • Age 65: $422 per month
  • Age 75: $820 per month


To determine whether long-term care insurance is right or possible for you, consult professionals who can help you make the right decision.


This article is presented as information only and should not be considered insurance, tax, or legal advice.

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