Here's the answer to the question, "what's my real risk of needing long-term care?" It's either 0% (you'll never need it) or it's 100% (you'll need it). I call it the "lottery you don't want to win" ... though the odds are significantly greater than winning the lottery!
Someone turning age 65 today has almost a 70% chance of needing some type of
long-term care services and supports in their remaining years.
What is Long-term Care:
Long term care is care that you need if you can no longer perform everyday tasks (activities of daily living) by yourself due to a chronic illness, injury, disability or the aging process. Long term care also includes the supervision you might need due to a severe cognitive impairment (such as Alzheimer's disease).
This type of care is not intended to cure you. It is chronic care that you might need for the rest of your life. You can receive long term care in your own home, a nursing home or another long term care facility, such as an assisted living facility.
People often confuse long term care with disability or short-term medical care. Long term care is not:
*care that you receive in the hospital or your doctor's office
*care you need to get well from a sickness or an injury
*short-term rehabilitation from an accident
*recuperation from surgery
Many people think all long term care is provided in nursing homes. However, long term care is most often provided at home, in adult day care facilities or in assisted living facilities.
Most long term care services are provided by family members and
friends. This type of care, informal care, also includes long term care
services provided by unlicensed caregivers who are not arranged or
supervised by a home care agency.
In today's society, adult children are more apt to live further away from their parents. In addition, many adult children are taking less vacation time and working longer hours. Taking care of a family member is a time-consuming commitment that often demands a significant number of hours from multiple family members.
Even if family members can find the time to provide caregiving to a family member, it often comes at a tremendous financial cost. Caregiving can cost the average caregiver in lost wages, pension
benefits, and Social Security.
While having a family take care of you might be an option, it might be difficult to do without additional assistance.
Care can also be provided by professionals trained in the field of long term care. This type of care, formal care, is provided by a home health aide or homemaker arranged or supervised by a home care agency or provided by a nurse or therapist.
Who Needs Long Term Care?
Anyone can need long term care at any time in their life. Automobile and
sporting accidents; disabling events such as strokes, brain tumors, and
spinal cord injuries; and disabling illnesses such as multiple sclerosis and
Parkinson's disease are examples of injuries and ailments that can
happen to anyone at any age.
Nearly 41% of long term care is provided to people under age 65 who
need help taking care of themselves due to diseases, disabling chronic
conditions, injury, developmental disabilities, and severe mental illness.
According to the U.S. Department of Health and Human Services (HHS),
about 70% of people turning age 65 will need long term care services at
some point in their lives. And, contrary to what many people believe,
Medicare and private health insurance programs do not pay for the majority of long term care services that most people need . . .
Planning is essential for you to be able to get the care you might need.
Long term care is not just for the elderly. Nearly 41% of long term care is provided to people under age 65 who need help taking care of themselves due to diseases, disabling chronic conditions, injury, developmental disabilities, and severe mental illness.
Does Medicare, Medicaid or Health Insurance Cover Long-term Care?
Medicare is generally available for people over age 65 and the disabled. It only pays limited amounts for skilled care following a hospital stay and it is not intended to cover care that assists people with activities of daily living for long periods of time. Specifically, Medicare covers the first 100 days of skilled care in a nursing home after a hospital stay of at least 3 days and as long as you enter a nursing home within 30 days of leaving the hospital. Medicare covers some home health care for the treatment of an illness or injury, but does not cover long-term custodial care.
Medicaid (Medi-Cal in California) is a state-based program supplemented by Federal funds that provides health services to the poor and impoverished. Medicaid might cover you if you meet your state's poverty criteria and receive care that meets your state's guidelines.
Health insurance rarely covers ongoing chronic care needs. Most health plans, including FEHB, TRICARE, and TRICARE for Life, are intended to cover skilled, short term medical care as you recover from an illness or injury.
How to pay for Long-Term Care
Paying from personal savings is one way to cover long term care expenses. However, you should consider the cost of long term care services before relying on this method. Here are the current national averages for long term care services:
$19 an hour for a home health aide
$71 a day for care in an adult day care center
$3,427 a month for care in an assisted living facility
$227 a day for a semiprivate room in a nursing home
$258 a day for a private room in a nursing home
Home care—which most people prefer—is generally more affordable than nursing home care but still can be expensive. When averaged nationally, the cost of a six-hour visit by a home health aide is $114. That's $29,640 per year for a home health aide visiting six hours per day, five days a week.
In 2013, the national average cost of a semiprivate room in a nursing home was $82,855 annually. You may wish to consider the total cost if you need more than one year of care. For example, the cost of care for three years is more than $248,000. Paying for long term care out-of-pocket may be an option for you if you can afford these expenses.
Of course, the figures above are national averages and long term care services may be less expensive or more expensive in your region. Also, each person's situation is unique and you may save more or less than others.
The Department of Veterans Affairs (VA) health system makes certain long term care services available to veterans based on a priority ranking system, with highest priority given to those with severe service-related disabilities.
VA-funded long term care may be worth investigating, especially for veterans with service-related disabilities and/or limited incomes and assets. Keep in mind, however, that in addition to the priority ranking system, the availability of long term care services from the VA may be subject to funding limitations and may vary by geographic area.
Long term care insurance is a reliable method of paying for long term care expenses. It is an insurance product which pays for long term care services in many settings, such as at home, a nursing home, assisted living facility, and adult day care facility.
Many people elect to buy long term care insurance so they will not need to deplete their savings should they need long term care services. Long term care insurance can help ensure that financial resources and support are in place when you need them.
You must apply for long term care insurance coverage. If you are approved for coverage, pay your premiums, and you meet the insurance carrier's criteria for benefit payment, you will be reimbursed for covered long term care services up to the amount of daily benefit after you satisfy the waiting period.
Medicaid is a state-based program supplemented by Federal funds that acts as a safety net to provide health services to those who meet their state's poverty guidelines. Medicaid pays for the largest share of long-term care services, but only if you meet financial and functional criteria.
Medicaid might cover your long term care costs if you meet your state's poverty criteria and receive care that meets your state's guidelines. Usually this means expending all but $2,000 of your assets and savings (except for, perhaps, your house and car). It also means receiving care from a limited number of state-approved caregivers (mostly institutions like nursing homes) that are willing to accept Medicaid's payments.
When Medicaid pays for long term care services, it limits your choice in terms of the type of care you can receive and where you can receive it. Many people "spend down" their assets to state-required levels to become eligible for Medicaid, using up their retirement nest-egg and resources intended for their heirs.
Some people will try to transfer their assets to a family member or a trust to avoid "spending down" their assets. The Federal government now allows states to go back five years to examine the finances of people applying for Medicaid.
If the state finds that assets were given away during that time period, they can impose a penalty period before you are eligible to receive benefits. Typically, this is determined by dividing the average monthly cost of nursing home care into the amount that was given away.
When should I apply for Long-term Care Insurance?
You can purchase long term care insurance at any time as long as you are able to
pass medical underwriting. Since the cost for this insurance is generally based on
your age at the time of application, your premiums will be lower the younger you are
when you apply.
You will need to weigh the availability of your resources and your own personal
financial needs to help you decide when it is best to apply for long term care
Here are a few words of caution as you make your decision. It is important that you
apply for long term care insurance when you are in good health. That is because
most long term care insurance plans list certain medical conditions, or combinations
of conditions, that will prevent some people from being approved for coverage.
You shouldn't assume that you can’t afford long-term care insurance. Depending on
your specific needs, you may be able to get a long-term care policy for less than you
What determines your premiums
Insurance companies determine long-term care premiums based on several factors:
Age: The younger you are, the lower your premium will be.
Your health: Your health at the time the policy is issued will affect your premium. Your premium will be higher if you have health problems.
Elimination period: The longer you can pay your expenses before the company begins paying benefits, the lower your premium.
Benefit amount and duration: Rates are higher for policies with higher benefit amounts and longer payment durations.
Other factors: Long-term care costs may vary greatly from one area to another. Where you live will affect the cost of your coverage. Optional benefits you decide to add to your policy also will increase your premiums.
As the population ages, the costs -- financial and social -- of long-term care will rise rapidly. Are you prepared for it?
According to the CDC, in 2012, there were approximately 58,500 paid, regulated long-term care services providers in the United States, including 4,800 adult day services centers, 12,200 home health agencies, 3,700 hospices, 15,700 nursing homes, and 22,200 residential care communities. In total, long-term care services providers in these five sectors served about 8,357,100 people annually. Specifically, on any given day in 2012, there were 273,200 participants enrolled in adult day services centers, 1,383,700 residents living in nursing homes, and 713,300 residents living in residential care communities. In 2011, about 4,742,500 patients received services from home health agencies, and 1,244,500 patients received services from hospices.
Even if you decide not to buy long-term care insurance, you should have savings in case you become disabled in your later years. This ensures you’ll get the care you need, and protects your assets—for your own sake, and for your family. With nursing home costs at more than $200 a day and home health aides at $21 an hour, you’ll need to save a lot.
Here is some tough love: “A typical savings account won’t cut it.”
We strongly suggest some type of planning strategy now!!
Although it’s not exactly the most fun thing to think about how you might become disabled later in life, taking these important steps now have the potential to protect you and your loved ones for many years to come.