Long-term Care Insurance Guide

Have you considered getting long-term care insurance quotes?

If you haven’t, you should.

With people living longer, long-term care is becoming dramatically more common.

You may not be able to prevent the factors that will lead to long-term care, but you can prepare for it financially.

You can save money in anticipation, but long-term care has so many cost variables it’s almost impossible to save for.

Long-term care insurance has become increasingly necessary, so it’s important to get long-term care insurance quotes.

You need to have an approximation of how much coverage will cost, and that’s the place to start.

Why You May Need Long-term Care

A couple of generations ago, long-term care was not a major consideration.

For the most part, people simply didn’t live long enough to need nursing home care. For example, in 1970 the average lifespan was 70.8 years.

The need for long-term care increases with age.

Since relatively few people lived past 80 back in 1970, the prospect of long-term care was not seen as a pressing concern.

But as people increasingly live past 80 and even 90, the frequency of nursing home care increases dramatically.

Cognitive diseases like Alzheimer’s disease and dementia increase the longer you live.

According to the Social Security Administration, the average 65-year-old man can expect to live until age 84.3.

The average 65-year-old woman can expect to live until age 86.7.

What those statistics mean is that the average 65-year-old – whether male or female – can fully expect to live well into their 80s.

That dramatically increases the chances that long-term care will be necessary.

We can also add to the equation the fact that medical technology is advancing and extending lifespans even further.

But while those technologies and therapies may keep people alive longer, they also increase the possibility of needing long-term care.

How Much Does Long-term Care Cost?

Are you ready for some scary numbers?

According to Senior Living.org, the average cost of a nursing home facility in 2018 looks like this:

  • Semi-private room: $225 per day, $6,844 per month, and $82,128 per year.
  • Private room: $253 per day, $7,698 per month, and $92,376 per year.

Let’s work with a lower number – $82,000+ for a semi-private room.

Even if you have $1 million saved up for your retirement, if either you or your spouse end up in a nursing home for 10 years, the cost of the facility will eat up over $820,000.

That’s working with today’s prices.

The long-term trend on the price of nursing home care has been very discouraging.

$82,000 might be the annual figure today, but rest assured it will be substantially higher in 10 or 20 or 30 years.

For perspective, let’s look at the history of nursing home care costs.

Take a look at the screenshot below showing the cost of nursing home care going back to 1950, 1960, and 1970 (we can use our imaginations to fill in what’s taken place since then):

Cost of long-term care

(Source: Senior Living.org 1950-1970: Nursing Home Population and Cost)

Look at the line that says Expenditures per resident.

Notice the annual cost per year was just $700 in 1950.

By 1963, it increased to $1,800.

And by 1969, it reads $5,300.

From 1950 to 1969, there was already a powerful price spiral in the cost of nursing home care.

In just 19 years, the average annual cost per resident increased by 7.5 times, from $700 to $5,300.

From 1969 to 2018, it increased from $5,300 to more than $82,000.

That’s a more than 15 fold increase in 49 years!

Imagine if it “only” doubles in the next decade!

Do Medicare or Medicaid Pay for Long-term Care?

It may be that many people don’t bother to get long-term care insurance quotes because they assume the cost will be covered by either Medicare or Medicaid.

But both assumptions are only partially correct at best.

Let’s start with Medicare. Medicare has only limited provisions for long-term care.

Practically speaking, you won’t be able to rely on it.

Not only is the benefit very limited, but there are a matrix of events that determine if you even qualify for what benefits are available.

For example, to receive any reimbursement, you have to have more than one serious condition, and your stay in a facility must be temporary.

In fact, it would best be termed a rehabilitation situation.

In order to be eligible for benefits, you have to be transferred directly to a long-term care facility from an acute care facility.

Medicare will then pay for the first 20 days of your stay.

You’ll then be required to pay a coinsurance of $167.50 per day for the next 80 days.

Beyond 100 days, Medicare pays no benefits for long-term care.

What about Medicaid?

Medicaid actually does have benefits for long-term care – sort of.

First, the daily benefit payment is very small, which limits the number of facilities that will accept Medicaid patients.

You can generally expect the better facilities not to participate in the plan.

But just as important, you must first exhaust all other financial resources before you’ll be eligible for Medicaid.

That means there can be no assets left either for the support of the noninstitutionalized spouse or the heirs upon death.

And if that isn’t enough, it can take many months to get Medicaid approval for an extended nursing home stay.

How is the Need for Long-term Care Determined?

There is actually a set of guidelines which determine when a person is in need of nursing home care. They’re referred to as Activities of Daily Living, or ADLs.

These are six basic activities we’re normally able to perform on our own.

But the inability to perform two or more are considered sufficient to establish the need for long-term care. It’s also used as a determination by insurance companies for paying benefits on long-term care insurance policies.

The sixth ADLs are as follows:

  • Bathing – The ability to clean oneself and perform grooming activities like shaving and brushing teeth.
  • Dressing – The ability to get dressed by oneself without struggling with buttons and zippers.
  • Eating – The ability to feed oneself.
  • Transferring – Being able to either walk or move oneself from a bed to a wheelchair and back again.
  • Toileting – The ability to get on and off the toilet.
  • Continence – The ability to control one’s bladder and bowel functions.

There’s also a secondary list, referred to as instrumental activities of daily living, or IADLs:

  • Using a telephone
  • Managing medications
  • Preparing meals
  • Housekeeping
  • Managing personal finances
  • Shopping for groceries or clothing
  • Accessing transportation
  • Caring for pets

Whether ADLs or IADLs, all relate to basic functions of life.

They don’t relate to any specific medical conditions that may further limit independent living.

Long-term Care Insurance Quotes – How Much Does it Cost?

Many different insurance companies provide long-term care insurance quotes, making it very difficult to generalize premium rates.

But just as a ballpark, the American Association of Long Term Care Insurance put out the following sample policies back in 2012.

We can assume the premiums will be higher today, but they nonetheless serve as examples of what’s included in long-term care insurance quotes.

Example #1:

  • Age: 55
  • Daily benefit: $150
  • Benefit period: 3 years
  • Inflation protection: 3% per year
  • Cost: High, $3.446; Low, $1,764; Average, $2,007

Example #2:

  • Age: 55
  • Daily benefit: $150
  • Benefit period: 3 years
  • Inflation protection: 3% per year
  • Cost: High, $4,824; Low, $2,080; Average, $2,466

Example #3:

  • Age: 60
  • Daily benefit: $150
  • Benefit period: 3 years
  • Inflation protection: 3% per year
  • Cost: High, $5,637; Low, $2,794; Average, $3,381

Please notice several factors figure into the premium calculation:

  • Age – the older you are, the higher the premium is.
  • Daily benefit – $150 is not enough to cover the average cost of $225 for a semi-private room, or $253 for a private room. The benefit can be adjusted, based on premium cost. It can be $100, $150, $200, or whatever daily rate works for your policy.
  • Benefit period – notice it’s limited to three years. That can also be adjusted for each policy. But a policy that will cover you for life, if it even exists, would be prohibitively expensive.
  • Inflation protection – a policy must include this provision. Long-term care costs are rising each year, and without this provision, a policy taken today may be entirely inadequate in 10 or 20 years.

The important take away is that each of these factors must be discussed with your insurance agent when getting long-term care insurance quotes.

Why You Need Long-term Care Insurance

We’ve already discussed longevity and the potential medical conditions that can cause a need for long-term care insurance.

But there are two other factors that make this coverage increasingly critical:

  1. The cost of long-term care will be expensive by itself, but if you try to pay it out of personal assets, it could leave inadequate financial resources for the non-institutionalized spouse.
  2. A multiyear stay in a long-term care facility could cost many hundreds of thousands of dollars, and even over $1 million. There may be no money left to leave to your heirs after a prolonged stay in a facility.

Still another complication is the possibility that both spouses could eventually end up in a long-term care situation.

That would be a financial nightmare, one which would be difficult to cover even with the best insurance policy.

But by making sure there’s a policy in place to cover at least one of you, you can minimize the cost that care requires.

In the end, the most cost-effective solution to long-term care could be a mix of long-term care insurance and personal financial assets.

For example, a policy that covers $150 per day could be a welcome supplement in a facility that costs $225 per day. The remaining $75 could be covered out of financial assets.

That type of arrangement won’t completely protect your assets, but it will get you or your spouse the care that you need at a much more reasonable cost level.

We’re insurance brokers and can help you find the best long-term care insurance policy.

Contact us and let us discuss some long-term care insurance quotes.

We’ll do our best to find one that will work within your budget.

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About Jeff Root

is the owner of rootfin.com. He's an independent life insurance agent who has helped 1,000's of consumers purchase life insurance online and over the phone.

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