When considering how to pay for your own or a loved one’s long-term care needs, long-term care insurance (LTCI) is often recommended as a way to help cover the costs. Assisted living care alone can cost a staggering 20K to 70K or more a year depending on what level of care is needed.
Medicare pays for less than 20% of long-term care services and only for medically necessary, skilled nursing facilities or home health care for persons who meet certain criteria. It doesn’t pay for the vast majority of LTC costs associated with custodial care (bathing, dressing, eating, toileting, etc.). Medicaid is only available to those who meet financial eligibility qualifications. Likewise, health insurance covers very little long-term care – rather, health insurance covers short term episodes of care typically related to acute health care. Many individuals and families must dig deep to pay ‘out of pocket’ for care or find other private insurance to help.
LTCI is a product designed to pay for costs associated with custodial care. Available from private insurance companies, a variety of plans are offered ranging from nursing home only coverage to those covering in-home care and adult day care. Benefits are priced based on the individual’s age and health status. So, the younger the purchaser the lower the premium typically. The majority of individual policies require a review of an applicant’s medical history before a policy will be offered. Thus, individuals with pre-existing conditions may be denied coverage, or be required to pay a much higher premium However, some group policies, offered through an employer, do not require a review of an applicant’s medical history.
Insurers in this industry reportedly have struggled to appropriately “price” their products and therefore have had to raise premiums. If a person can obtain a long-term care insurance policy, they may be taking a gamble on whether or not their insurance premiums will increase even after they are locked into the insurance and have made regular premium payments. If a premium increase is unaffordable, especially if a person is on a fixed-income, then it may mean no longer making payments and losing the coverage. Useful, objective information about purchasing LTCI is available on the National Clearinghouse for Long Term Care Information: http://www.longtermcare.gov/LTC/Main_Site/Paying/Private_Financing/LTC_Insurance/Buying.aspx
Terry Savage, the national syndicated financial columnist for the Chicago Sun-Times, wrote two good columns focused on long-term care insurance premium rate hikes and strategies for dealing with these hikes. In her second column, Savage addresses how to deal with premium increases, including opting out of inflation protection, or reducing the benefit period To read the articles online, follow the links for Chicago Sun-Times: “How is a 90% long-term care rate hike OK?”, and Chicago Sun-Times: “How to handle soaring long-term care rates.”
For additional information about long term care insurance, refer to FCA’s publication “Insuring Your Future: What Caregivers Need to Know About Long Term Care”
We are interested in hearing about your experience with LTCI. Please share your questions and comments.