Group Long Term Care Insurance
Generally, Americans are living longer. For all too many, the dream of a comfortable retirement is being shattered by the harsh reality of rising health care costs.
A catastrophic illness, such as a stroke or Alzheimer’s disease, can cause unexpected financial hardship or even the prospect of welfare during what should be the “golden years.” What are the problems? What are the answers?
SKYROCKETING HEALTH CARE COSTS
Inflation is a fact of life. Unfortunately the frightening statistics show that health care costs rise much faster than other services. Advances in medical techniques and pharmaceuticals may allow us to live longer lives, but they carry staggering price tags. Because seniors require a greater percentage of health care services, the burden of these increasing costs can quickly outstrip their assets.
AN AGING POPULATION
In 1997, one out of seven Americans was classified as elderly. However, by 2031, one out of 5 will be 65 or older, and by 2050, one out of 4 will be over the age of 85.
Too few of us are planning for the eventual need for long term care. Living longer does not necessarily mean living in perfect health. When we think of adequate income for retirement, we frequently fail to include the possible long term care costs. These can quickly erode accumulated assets.
THE CHANGING FAMILY
The traditional solution for long term care, moving in with one’s children, has been made less viable by the geographic scattering of most families.
The two-income family is another problem. Without a family member who regularly stays at home, more aging parents have no choice but to enter a nursing home.
Statistics show that today’s American family can expect to care for children for 17 years and aging parents for as long as 18 years. This “triple squeeze” - having to pay for one’s own children, personal goals, and parental care - can mean financial hardship for the child as well as the parent.
WILL YOU LOSE ALL YOU HAVE WORKED FOR?
In the growing elderly population, one in four will require nursing home care for 3 months or longer, and one in 10 will need nursing home care for 3 years or more.
The current cost of nursing home care can range from $36,000 to $75,000 annually. 55% of this expense is shouldered by the elderly and their children, squeezing both financially. A more frightening fact is this: Half of those now living in nursing homes on welfare assistance originally entered the home paying their own way.
WHAT ABOUT MEDICARE AND MEDICAID?
Medicare and Medicaid are both good insurance programs. However, the biggest misconception people have is that these programs cover all medical needs after age 65. The truth is, Medicare insurance is not designed to provide resources for long-term care, which is usually custodial, not medical, in nature. Medicaid, the final safety net, is only useful as a last resort. Applicants and their spouses must be effectively impoverished to qualify, because Medicaid was designed to provide only for those who have no resources of their own. Additionally the choice of facilities providing Medicaid-approved long-term care, is limited.
HOW CAN YOU PROTECT YOUR FAMILY?
Whether you are concerned about your own long-term care or that of your parents, good financial planning is critical.
There are a number of ways to protect your assets and provide yourself some choices for long-term care. A personal long-term care plan may include self-insurance (social security and personal assets), long term care insurance, and outside assistance.
It is important to allocate sufficient assets within your plan to allow a choice of better levels of nursing home and/or home health care.
WHAT IS LONG-TERM CARE INSURANCE?
Long-term care insurance policies are designed to protect you from the risk of financially devastating long-term care costs. They are intended to cover catastrophic costs only and do not cover every last dollar of long term care.
Although there are many options from which to choose, let the buyer beware. All are relatively expensive, and some may actually be worth little when you most need them. You must also evaluate the financial strength of the insuring company and its ability to cover your benefits in the future.
When evaluating this type of policy, you should consider your personal preferences: how much you can afford to pay, your desired level of independence, and other personal factors. You should also look for exclusions that might prevent your benefits from ever being paid. Your policy should also have certain minimum provisions, including:
- No pre-hospitalization requirement
Many individuals go directly from their own homes to a nursing home, without several preliminary days of hospital treatment.
- Coverage of all medical conditions
It is critical that coverage includes Alzheimer’s disease, as diagnosed by a physician.
- An adequate inflation provision
The costs of all aspects of medical care have been rising significantly faster than the average rate of inflation, and there is no indication that this trend will abate.
- Examine the benefit triggers of the policy
Is it based on your ability to perform necessary activities of daily life? Do you have coverage in the event of cognitive impairment?
This clause is essential to protect you from having your policy canceled.
- Admission to any level and any facility of care
There are three levels of care: skilled care, intermediate care, and custodial care.
WHEN TO ACQUIRE INSURANCE COVERAGE
Consider purchasing such a policy sooner rather than later. If you are 50 years old, a policy could cost as little as $350 a year. If you wait until 79, it could cost as much as $4,000. Consider also that your health in the future years could prevent you from buying a policy. You or a spouse could become “un-insurable” at any time.
Remember this: If an annual premium for such a policy were $1,500, and you paid this amount for 15 years, you could receive the full value in only 9 months of long term care.
ARE THERE OTHER WAYS TO COVER THESE COSTS?
Life insurance policies with “living benefits” and long term care riders are relatively new options. Because they are still new, you may wish to consult with a financial advisor before choosing such policies.
ARE THERE NON-INSTITUTIONAL OPTIONS?
You may choose other options for long-term care. Many seniors, who would rather live at home for as long as possible, prefer home health care. It can include both medical care and personal care services.
Other services available through community programs may include home care aides, adult day care, visiting nurses, Meals on Wheels, emergency response systems, community visitors, and transportation and shopping services. Costs vary widely. Medicare does not cover most.
Adult Congregate Living Facilities (ACLFS) provide a wide variety of services, including basic medical/nursing facilities, housekeeping, and personal care assistance.
THE PERSONAL ISSUES
The personal costs of long-term care can be as devastating as the financial costs. For the adult child caring for the aging parent, there may be resentment when personal assets are diverted to parental care followed by guilt over these feelings. Conflict among siblings over the cost of parental care is common.
For the parent the loss of personal pride and a fear of ill health and increasing dependence, as well as financial worries, can be overwhelming. Discussing these issues openly early on among family members is critical. The objective opinion of an appropriate financial advisor can protect you or your parents from becoming part of the troubling statistics facing the aging.
Long Term Health Care Information Resources
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