One of my closest friends, Ben, lost his grandmother a few years ago. Based on many long talks with Ben, I could tell that his grandmother’s death devastated his whole family. It was certainly rough losing their beloved matriarch, but the worst part was the strain it put on the family. Her husband predeceased her by nearly a decade, and she lived in the country, a two-hour drive from her closest child. Another of her children lived out of the state, and the third out of the country. That meant that when her condition reached a point where she needed daily care that was neither covered by Medicare nor her supplemental plan, it fell on Ben’s family to provide direct care and financial support. It begs the question, when should you consider purchasing long-term care insurance? (For more on what Medicare and Medicaid will cover, read this.
When Ben was growing up, his grandmother was the picture of health. Even when his grandfather got to the point where he needed to ride in a golf cart, Ben’s grandmother insisted on walking the full 18 holes and using a pull cart. After her husband died, she doubled down on long walks, started an aerobics routine, and became an incredibly fit woman for her late 60’s.
Then she contracted COPD (chronic obstructive pulmonary disease), a condition in which the air passageways in the lungs become constricted so that one is unable to draw a full breath. At the onset, it was merely a mild disturbance in her breathing, but as it set in, she was unable to move from one room to another without extremely labored breathing. This not only severely limited her activity, but also led her to eat more, and within a year she was fighting obesity. The extra weight not only put more pressure on her lungs, it also made basic activities even more difficult. One morning, she took a nasty fall in the shower, and broke her ankle. It led to trouble with blood circulation in that foot, and she had to be hospitalized. At that point, her children realized she needed someone to assist her on a daily basis, but neither a nursing home, nor outpatient nursing care were covered by her insurance.
Ben’s parents had to postpone construction on a house they had been planning for years to help pay for his grandmother’s part-time care. A half-dozen family members had to schedule shifts to stay with her to cover the times when they couldn’t afford professional help. When she died 18 months later, Ben’s entire family had suffered much financial and psychological stress, some of which he says lingers years after her death, still causing bitterness and antagonism between family members who were close before her sickness. The death of a loved one is always a tragedy, but the sadness is greatly compounded when the death causes so many extraneous difficulties.
I knew nothing about the importance of Long-Term Care insurance (LTCi) before Ben told me about his grandmother’s decline in health and the impact on his family. However, hearing that story has clearly shown me a lot about how valuable LTCi can be. Had Ben’s grandmother decided to purchase in LTCi, the experience would have been significantly easier on her children, her grandchildren, and herself. She would have received more professional help, but more importantly, she would have died without the burden of knowing the strain she had placed on her family.
Types of Long-Term Care Services
There are two primary types of Long-Term Care services: skilled care and personal care.
Skilled care treats conditions that demand a doctor or other medical professional. Anything involving rehabilitation, medication, or other medical treatments falls under skilled care. Because such care involves regular, direct contact with one – or more often several – specialized medical professionals, it usually takes place in a nursing home or, if the patient is still able to commute, in a different medical facility. Skilled care can take place in the home, but that comes with greater costs, which would mean a larger LTCi plan would be necessary.
Personal care involves helping a patient with their basic day-to-day activities that they have become too infirm to handle on their own. This includes preparing the patient’s food, helping them bathe and use the bathroom, and other tasks that require assistance. This type of care is an essential aspect of nursing homes, but can also be provided in the home.
Many LTCi policies also include hospice care. Hospice is a blend of skilled and personal care that focuses on easing the patient’s passage to death. Hospice care commences when the patient, family and medical professionals feel continued attempts to cure any conditions are superfluous, and the care transitions to making the patient feel as comfortable as possible in their final weeks and months. It includes most aspects of personal care, continuing to assist in daily life, but the skilled care switches to pain alleviation and symptom management, no longer aiming at the root cause.
Without LTCi, Ben’s family was able to scrape together the necessary funds to afford limited hospice care for my grandmother, but it caused financial hardship and was short of the full hospice care that would have been ideal both for his grandmother and the rest of the family. Access to hospice care is one of the reasons Ben really regrets that his grandmother didn’t have LTCi.
When one’s health is deteriorating, and the need for Long-Term Care sets in, it can be an extremely stressful time. The body is failing, major changes have to be made, and mortality feels as present as ever before. This is a time in life when staying in the home one has built and maintained for many years can be a great comfort. However, if one is to receive Long-Term Care in his or her home, many dwellings aren’t properly prepared for the needs of such a patient.
The United States Department of Health and Human Services provides many suggestions on how to prepare the home for Long-Term Care, including:
- Adding ramps for wheelchairs and walkers
- Wider doorways
- Added lighting
- Safety bars in the bathroom, particularly the shower
- Stairway chair lifts
- If possible, moving the living area from the second floor to the first
- A separate apartment for live-in help
The Department of Health and Human Services also suggests taking care of any tax or legal issues before Long-Term Care is necessary, and researching everything from availability of Long-Term Care in the area to the possibility of home delivered meals. In addition to purchasing a good LTCi policy, there is much preparation that can be completed in advance, and it will almost assuredly smooth the transition into Long-Term Care.
The Price of Long-Term Care
Long-Term Care is one of the most expensive types of treatment. Because it either involves medical professionals commuting to the patient’s house, or includes the myriad costs associated with living at a nursing home or medical facility, prices for Long-Term Care vastly exceed those for basic care.
According to the Texas Department of Insurance, average costs for Long-Term Care are as follows:
- Living in an assisted living center- $3,000 per month
- Private room in a nursing home – $6,000 per month
- Adult day care – $40 per day
- Home Health Care – $20 per hour
In 1999, the average length of stay for nursing home patients was 892 days, which is almost two and a half years. Paying $6,000 per month for 30 months would make for a total cost of $180,000 dollars. That high a price is more than enough to destroy many families’ savings, proving that even tough LTCi can be expensive, it has the potential to prevent much higher payments.
When To Purchase LTCi
Because the expenses of Long-Term Care usually occur towards the end of life, the earlier you purchase an insurance plan, the more time you have to pay into the plan, and the less costly your premiums will be. The AARP Public Policy Institute published a interesting LTCi fact sheet including the following 2010 national averages for premiums in different age ranges:
- Under Age 55: $1,831/year
- Ages 55-64: $2,261/year
- Ages 65-69: $2,781/year
- Ages 70-74: $3,421/year
- Age 75 and older: $4,123/year
This clearly shows that if LTCi is a priority, it should ideally be purchased at as young an age as is practical. According to a New York Times article on LTCi for younger people, a 25-year-old might only have to pay about $635 annually for a policy that “provides for $164,000 in total benefits over time before it runs out, with the option to increase coverage in the future…” It may be difficult for many younger people to consider such difficult (and hopefully distant) possibilities as Long-Term Care needs, but as LTCi can often be an essential factor in a comfortable retirement, it’s incredibly helpful to start planning as soon as possible.
Insurance vs. Investment
Because people often pay for Long-Term Care policies for many years before they start to reap the benefits, some have posited that individual investment could be a better means of saving for the potential costs of Long-Term-Care. To see if this theory was on solid foundation, Howard Gleckman dug into the numbers in a Forbes article comparing the costs and benefits of purchasing LTCi versus investing the money that would otherwise be spent on LTCi premiums.
For this hypothetical LTCi scenario, Gleckman assumed a 35-year-old can purchase an “LTC policy that pays $200/day for 3 years with a rider that increases benefits by 4 percent-a-year to protect against inflation for about $65/month. That’s equal to a benefit of about $219,000 in today’s dollars.” In the investment scenario, the 35-year-old could invest $65/month in a mutual fund with a 6% long-term rate of return that results in $230,000 (assuming 50 years of compounding and LTC needs at age 85). The investment would apparently provide a net gain of $11,000 over the LTCi scenario.
Combine that $11,000 dollar difference with the possibility that LTCi premiums will increase over time and the possibility that no Long-Term Care will be needed in the end, and it may seem like the investing is clearly better than purchasing an insurance plan. However, Gleckman argues that because 50 years is such a long time there would be ample opportunities to deviate from the investment plan, and instead spend the money on college tuition, car repairs, vacations, or any of the other expenses that arise during life. While many people do not stick to their investment plans, Gleckman points out that LTCi has the benefit of basically forcing you to save. Furthermore, some LTCi plans protect against inflation, which is an important consideration given the rising costs of Long-Term Care.
Investing in mutual funds, stocks, or bonds won’t necessarily result in a 6% rate of return – it might provide more money or it might end up actually losing money. Because a good LTCi policy comes with a guarantee that the money will be there at the most fragile point in life, it is still an excellent idea for many people who choose to plan ahead.
Find the Best Provider
In a recent article for the Seattle Times, Cynthia Flash wrote a profile of Dan and Vera Gunnerson and their struggles to receive payments once Long-Term Care became necessary for Dan. The couple purchased an LTCi policy almost twenty years ago. The policy was meant to cover skilled-nursing-home care. Dan’s premium started at $1,425/year, but over time it has risen to $4,800/year.
When Dan’s Parkinson’s disease and dementia became too much for Vera to handle, the policy provider refused to pay for general nursing home care because a doctor had recommended that he live in a facility specializing in dementia – which is not covered under Dan’s policy. As such, Dan and Vera are embroiled in legal battles, and not receiving the care they thought they paid to cover for years.
Still, Flash posits that this story isn’t cause to avoid LTCi. She cites multiple experts who maintain that for many people, LTCi is very wise investment as long as you find the right policy provider. Because Long-Term Care comes at a time in life when one is extremely fragile, it is that much more important to be as diligent as possible in finding the best plan when you’re still young enough to thoroughly check the quality of benefits and how easy it is to process claims.
Planning for the future can be difficult in an era when technology is changing so fast. New medical discoveries are allowing many elderly Americans to live longer and longer than their predecessors. Extended life is a great thing, and it’s also one of the reasons we purchase insurance and plan ahead for unexpected health woes. However, extra years also provide further opportunities for improved Long-Term Care, and new technologies are often rather expensive.
This means costs for Long-Term Care Insurance are on the rise. John Reid Blackwell detailed these higher rates in an illustrative article for the Richmond Times-Dispatch. He says that from January 1st, 2009 through August 14th, 2013, there were 82 rate increases were sought by LTCi providers and approved by state regulators in Virginia. Furthermore, he states that the average increase was 36%, which can be a great expense for a policy that’s already more than $1,000 per year.
Such rate increases are by no means limited to Virginia. They are prominent throughout the country, but it’s no reason not to invest in LTCi. The rise in premiums for LTCi plans is partially due to inflation, but mostly because of longer life-expectancy and increased medical costs. That means that even though the price of an LTCi plan is rising, so is the risk of not having one. The above estimate of $6,000 per month for a private room in a nursing home (i.e. the Texas average) is already high. If that price continues to rise, and the likelihood of a longer stay increases due to longevity, it makes even the rising cost of Long-Term Care Insurance worthwhile.
The end of life will always be a difficult time. However, having a quality LTCi can make the period far easier. While you should always be diligent when researching and selecting such an important plan, having the right plan in place can make all the difference in the world for you, your family and all of your loved ones. Instead of having your final years mired in concerns about medical fees and the burden of family members, LTCi can allow the time to be peaceful and the focus to stay on that which is most important.
Other Enhanced Insurance articles related to Long-Term Care Insurance:
Long-Term Care Insurance for People with Disabilities
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