Making smart decisions about long-term care

There are certain unavoidable facts of life, great levelers of the playing field, certainties. Death and taxes usually get the most coverage in this arena, but a close runner up is the fact that we, every single one of us whether we like it or not, are getting older. With age comes wisdom and, unfortunately and eventually, failing health.

As primary caregiver for a loved one who suffers from Parkinson’s disease and dementia, I am acutely aware of the effects of aging — and how certain decisions we make and misconceptions we live with can impact the twilight of our lives. Years ago, a relative of mine was faced with a husband who rather suddenly required long-term care. Because they had not taken the necessary steps to prepare themselves and their assets, the care cost them greatly, depleting a lifetime of savings. Thankfully, after this experience she prepared for her own care with the purchase of a long-term care insurance plan, without which the cost of her own care could be an unbearable burden. The lesson simply put: Long-term care insurance helps keep your life and the lives of your loved ones from being turned upside down.

An overview of long-term care

It’s an all-too-common misconception that health insurance will cover your entire medical and care costs, which leads many to overlook long-term care insurance. Your health insurance will cover a trip to the hospital, but a trip to the hospital won’t help you or your loved one get dressed or make it to the bathroom on a daily basis. Essentially, long-term care (LTC) focuses more on caring than curing. It’s meant to maintain a person’s maximum level of independence.

Generally speaking, the threshold for LTC is based on one’s ability to perform daily tasks like getting around the house, bathing, dressing, eating and feeding oneself, and using the toilet (includes both incontinence issues and the physical act of getting on and off the toilet). Should you or a loved one be unable to perform two or more of these or require substantial supervision because of a mental disorder like Alzheimer’s, LTC is necessary.

LTC by the numbers

According to the American Association for Long-Term Care Insurance (AALTCI):

 Of those in need of LTC, almost forty percent (3.7 million) are under 65 years of age.

 36 percent receive care for dementia, 10 percent for nervous system and sense organs, 8 percent for stroke, 7 percent for heart disease, and 6 percent for musculoskeletal and connective tissue.

 49 percent receive care at home, 31 percent in an assisted care facility, and 20 percent in nursing homes.

The U.S. Department of Health and Human Services estimates that 70 percent of Americans who reach the age of 65 will require LTC at some point in their lives. Interestingly, the need for care varies dramatically by gender. On average, women are responsible for roughly 67 percent of LTC claims and require care for three to five years. In contrast, men make up about 33 percent of all claims and require an average of only 12 to 18 months of care.

Perhaps the most important numbers to consider when looking at LTC are those associated with cost. Without insurance or a family member working as a caregiver for no pay, care can run upwards of $6,000 a month. Even when a family member dedicates all of his or her non- working hours to being a caregiver, services like adult daycare and home health aides are necessary and can cost more than $60 every day. The long-term care industry isn’t immune to inflation, either. The AALCTI reports that, for just one person, the cost of care today is:

 $73,000 for one year

 $225,570 for three years (the average length of LTC claims)

 $387,500 for five years

In 10 years those numbers are expected to climb to:

 $98,100 for one year

 $303,200 for three years

 $520,800 for five years

And in 20 years LTC is expected to run:

 $131,850 for one year

 $407,500 for three years

 $700,000 for five years

Compare these figures to the monthly insurance premium estimates from the AALCTI for an average daily benefit payout of $150 for three years, and the smart decision becomes abundantly clear. At age 40, the combined monthly cost for a couple is only $83. If you enroll for LTC insurance (LTCi) at 55 (just below the average age of enrollment, 57), the monthly premium for a couple is still just $123, less than half of one day’s combined payout. If you wait until 65, the premium for a couple is only $225 per month. Keep in mind that the older you are, the more likely it is that you’ll be denied coverage when you apply, and all insurance policy premiums are determined by specific risk factors with final rates being determined with underwriting and approval.

The steps you need to take to prepare for long-term care

It’s never too early to start planning — but at some point, it will be too late.

1. Consider your options. Start by thinking about how long you might need care and what level of care you’d be comfortable with. Look at your assets and judge how long you can maintain this level of care on your own.

2. Make sure your family is on the same page. The last thing you want your family to be doing when things take a turn for the worst is scrambling to figure out what to do. Make sure everyone is aware of your wishes, and know who your primary caregiver is going to be. This person will need support, so make sure this is in place, too. Your heirs should know how your trust works and what to do in the event of your death.

3. Talk to an attorney and a financial planner. There are a number of documents you’ll need to have in order to make sure your wishes are carried out when you’ve reached the point of needing LTC. These include an up-to-date will, advanced directive (living will), and power of attorney (usually given to a close friend, spouse, or relative). Government benefits from Medicaid may be an option, but there are specific guidelines, and you’ll likely need to spend down assets to qualify. Be honest, and find out what needs to be done for your specific circumstances.

4. Purchase a LTC insurance policy. Even a small plan can offset medical bills dramatically and protect your assets, allowing you to leave a legacy for your family, not a pile of medical bills. The Life and Health Insurance Foundation for Education estimates that to equal the benefits of $2,528 in annual LTCi premiums, you’d need to save $11,295 annually — a difference of $8,767 every year. Talk to an experienced insurance broker about all options available for your specific LTCi needs.

Don’t wait until it’s too late to prepare for long-term care. You aren’t just gambling with your nest egg; you’re betting the lives and livelihoods of your loved ones. Wouldn’t you rather that your loved ones have the time to care about you, instead of having to stop everything to care for you? Talk to an experienced insurance broker about all options available for your specific LTCi needs today.

Julie Christiansen-Comeaux is president of Christiansen Insurance Network Inc. in Reno. Contact her at julie.comeaux@sbcglobal.net or 775-829-1245.