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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