What is LTC?

LTC is a variety of services and support to meet health or personal care needs over an extended period of time due to a physical or cognitive disability. These services can be offered in your home or a facility such as assisted living or nursing home. Most long-term care is non-skilled personal care assistance, such as help performing everyday Activities of Daily Living (ADLs), which are: bathing, dressing, toileting, transferring (to or from bed or chair), incontinence, and eating.

 

Why should you plan?

Approximately 70 percent of people over age 65 will require long-term care services at some point in their lives according to a 2019 Genworth study. And contrary to what many people believe, Medicare and private health insurance plans do not pay for the majority of long-term care services that most people need. Planning is essential in protecting your retirement assets for you and your spouse.  According to Health Day News (9/12/2007), life expectancy rates in the United States are at an all-time high.  Longevity risk is a multiplier for all other retirement risks such as income and asset depletion, medical costs, inflation, and yes – long term care.  The earlier in life that you plan for this protection, the more leverage you are able to utilize.  As your life expectancy shortens each birthday, you begin to lose that leverage little by little. Maximizing leverage involves three primary variables – medical well being, marital status, and age.  Healthier, younger persons are able to use fewer dollars to guarantee the same level of protection as older, less healthy folks.  Also, couples are now able to obtain a second-to-die life policy with accelerated LTC benefits which ultimately lowers the cost of coverage compared to two individual contracts.

 

How long is care usually received?

Historically, women need longer care than men:

• Women – Average care needed = 3.7 years

• Men – Average care needed = 2.5 years

• 20% need care beyond 5 years!

 

The cost of LTC (2014 Genworth study)

Long-term care is expensive on average:

• One year of care in a nursing home = $102,200

• One year of care in assisted living = $48,612

• One year of care at your home = $51,480

 

Who pays for LTC?

There are three primary sources of payment for long term care services:

• Self Pay – This is usually the first step until assets are depleted assuming one has not purchased LTCi.

• Medicaid – After assets are spent down to $2,000 for a single person, Medicaid will possibly step in

• Long Term Care Insurance (LTCi) – For those who have planned in advance, LTCi will cover the cost based on the terms of the contract in a setting of your choice

 

Traditional vs. Asset-Based LTCi*

Traditional

• Lifetime pay rates

• Significant industry rate increase history

• Finite benefit maximums

• Use it or lose it

• Single-life policies

Asset-Based*

• Lifetime-pay, limited term-pay, single-pay

• Guaranteed rates

• Lifetime benefit maximum (certain contracts)

• Immediate death benefit for unused LTC benefits

• Full return of premium

• Single or joint-life contracts available

* Check with your agent for specific contract details and suitability as products will vary by carrier

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Download a free copy here of “A Shopper’s Guide To Long Term Care Insurance” by NAIC.

 

 

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