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I’ve worked in government nursing homes where indigent residents live and get health care (physical and other therapies, recreation therapies, nursing, etc.) and their fees are usually nothing, or taken from their social security benefits. I’ve also worked in private facilities where the monthly cost for long term residents is between $6,000 and $10,000 per month, depending on whether a person has a private or semi private room and the kind of facility he or she chooses.
Think about $10,000 a month - a tremendous amount of money that can diminish a lifetime’s savings rapidly, causing tremendous stress on both the elderly and their families. It’s not just an American problem. I was listening to a radio program in Ireland and a woman calling in was highly distressed and tearfully admitted that she “could only afford for [her] mother to live for another two years.” That is the kind of feeling no family member should be forced into.
One solution to this is long term care insurance. This is an insurance plan that guarantees coverage for full time nursing home care should a person need to move into a facility or will pay for 24-hour nursing care in a person's home. It sounds like a great option we should all take but there are both benefits and risks that everyone should know.
The Risks:
Cost: Cost can vary drastically from one insurer to another and it is not cheap. A person can pay up to $700 per month for long term insurance which makes that payment is in itself a burden to many. A deep analysis of what exactly a person is paying for is also needed – many may not need some of the add-ons and having a third party can also help to avoid any kind of sales pressure. While most insurance companies are not out to scam, many work on commission and may push a person into buying plans they are likely to never use. Additionally, the average time a person needs long term care is about three to five years so longer policies may not be needed.
Premiums: Price hikes in premiums can happen without notice or explanation so in some cases, not much can be done. However, starting policies at a relatively young age (late 50s- 60s) can keep monthly costs down but will obviously see more price increases due to the longer period of time. But starting off in one’s 70s is not a good idea because premiums may start out at enormous cost and purchasers may find they can only afford the bare essentials. A buyer needs to be sure he or she can keep up with the premiums for many years.
The Economy: Companies are facing bankruptcy in record numbers. Instead of choosing a new company, it may be better to stick with insurers who have been around for many years, with a good track record. Paying premiums to a Johnny-come-lately company that flops in a few years is a lot of time and money wasted. Sometimes spending a little extra to a long standing company is worth it.
The Lines: Some policies can be so complicated that the temptation is to not read between the lines and simply sign - a very bad idea when it comes to long term care insurance. A buyer needs to make sure exactly what’s covered and what is not. If a person is inexperienced in this, a lawyer or a family member who has worked in this area can save a lot of time, money and heartache.
Scams: Not all insurance companies are out to help. Some may offer the world but end up fighting claims (with retained lawyers at their beck and call) that go on for so long that the claimant becomes too ill to fight back, or simply dies – leaving potential bills that eat up their estates. Evaluating each insurance company individually can help ensure this devastating occurrence does not happen.
The Benefits: The most obvious benefit is that if a person lands in a nursing home and has this kind of insurance, the majority of their care is covered and they save on up to $70,000 per year (the current average) of nursing home care. This can be of enormous financial and emotional relief for both buyer and family members alike. This benefit alone, when it works, can wash many of the risks away.
Length of Policies: Most experts recommend purchasing policies that offer three to five years of nursing care and no more – since only a very small percentage of nursing home residents need a policy for longer than that. This saves money from the beginning.
Tax deductions, employer incentives and flexible plans: The older we get, the less we know where we’re going in terms of our health. Therefore a flexible plan offered by insurers is a good idea so we can change options as our health and circumstances change. Some companies offer insurance through them at a lesser cost and some policies are tax deductible – again depending on circumstances. Investing a few hours of lawyer time can really make a difference here.
Long term care insurance can be the best decision a person ever made, or can lead to an entire estate being wiped out. Spending time comparing policies, reading the fine print and knowing both the risks and benefits can make sure it’s the former - for everyone.
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Add a Comment2 Comments
Yes, most long-term care is at home, so LTC insurance policies pay more for home care than assisted living or nursing homes.This article has some very sound advice. Buying long-term care insurance at all ages is one of the kindest things families can do for each other. Not only do children wind up taking care of parents who don’t plan for long-term care, but parents sometimes turn into unexpected caregivers of an adult child who is the victim of an accident or disabling disease. Americans should ask their employers to offer Long-Term Care Partnership plans to employees of all ages for two reasons: 1) employer-sponsored plans cost the employer nothing but are usually offered with limited health questions which makes it possible for most employees and spouses to qualify; and 2) Partnership plans allow policyholders to access Medicaid if the insurance isn’t enough while keeping assets equal to the benefits paid by the policy. They are available in most states. http://www.dehpg.net/ltcpartnership/map.aspx Having LTCI and never using it can be a wonderful thing...and is also a small mistake equal to the premium you pay each year. Not having LTCI and needing care can be a really, really huge mistake. Is it worth the risk? There are ways to construct guaranteed premiums. Most Americans will be touched by this very common occurrence, either as a caregiver or care recipient...and some will be both. If you don't want that care to be in a nursing home, this insurance is essential as it's not fair to ask loved ones to do it all to keep us at home.
November 28, 2010 - 5:19pmThis Comment
In the beginning of your article you refer to physical therapy in nursing homes paid by social security. Health insurance or Medicare/Medicare Supplements for those over 65 pay for skilled medical care.
In your article you only refer to nursing homes whereas todays comprehensive Long-Term Care policies cover custodial care in nursing homes, assisted living, adult day care and most importantly the place of choice, the home.
Also this care is not just for the aged but a high percentage of adults under 65 need custodial care due to illness or an accident. Long-Term Care insurance should be considered along with health insurance and the younger one is the least expensive it is over their lifetime.
You frighten people from considering such insurance quoting premiums of $700 per month. As a specialist in this area, such premiums would only apply to those who purchase Long Term Care when in their late 70's to 80's. Yet even at this age, if insurable, $700 per month is a lot less than $7,000 per month, the cost of a nursing home.
Advise your readers to go with the leaders, Met Life, John Hancock, Prudential, Mutual of Omaha who have the highest ratings and in business for over 100 plus years. Also advise that they work with a Long Term Care professional who can compare companies and come up with the best AFFORDABLE plan.
October 26, 2010 - 11:42amMaria Patsis, Richmond, Virginia
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