What is Long-Term Care?

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  A Brief Explanation

  Long-Term Care is the on going assistance that allows someone who is chronically ill (loss of 2 activities of living or severe cognitive impairment) to maintain their abilities and quality of life. This type of care is needed by people of all ages; in fact 40% of the people needing care are under age 65. A long-term care event within a family can be a stressful time that impacts them emotionally, physically, and financially.

  Long term care is expensive.

   Nationally, nursing homes average $191 per day for a semi private room and $212 for a private room, and could be much higher in your area. Home health aides average about $19 per hour. The average nursing home stay is almost 3 years, but for an Alzheimer’s patient it is closer to 8 years. How would this affect your savings?

  Long-Term Care is not covered by: traditional health insurance, group health insurance, Medicare, disability insurance, or social security. It is also a myth that living trusts or prenuptial agreements protect you assets from Medicaid. Medicaid has also recently expanded its look-back period for transferred assets to 5 years.

  Have you considered the fact that a long-term care event can have a substantial impact on your loved ones and your retirement savings? What’s your plan for long-term care?

  Self Insure?

   Once you consider the math you may see why many people are considering long-term care insurance to provide leverage and protect their assets. If you put $2,000 aside for your long-term care needs for the next 20 years, and you got an after tax rate of return of 5%, you would have saved $69,400 for your long-term care needs. Currently one year in a nursing home with a semi private room costs $69,715. If the cost of care grows by 5% over the next 20 years, the cost for that one year nursing home stay will be $184,744.

  The same $2,000 could be used on long-term care insurance premiums to provide protection for a healthy 55 year old person, a plan could be designed that would cover about: $150 per day, a 5-year benefit period, 5% compounding inflation with a 90 day calendar day elimination period. The 5% compounding inflation keeps the benefits growing for life, and would double the benefits every 15 years.

  A healthy couple age 55 could use that $2,000 in long-term care insurance premiums to protect their assets and a plan could be designed to cover about: $150 per day, a 3-year benefit period, 5% compounding inflation with a 90 day calendar day elimination period. The 5% compounding inflation keeps the benefits growing for life, and would double the benefits every 15 years. They should also consider a shared benefit rider where they have access to each other’s policy if they exhaust their own.

  Long-Term Care insurance should be used as a risk management tool to offset the enormous downside of long-term care that we all face. Insurance does not have to pay the full cost of care, just what you cannot afford to pay yourself without depleting assets.