If you ask the average senior about long-term care (LTC), they are just as likely to throw up their hands and say that both nursing home care and LTC policies are just too expensive. If they haven’t already got a plan in place, they aren’t likely to start investigating one at this stage of their lives.
But that could change. If the long-term care insurance industry focuses more on helping people cover home-based services, policies would be more affordable and more appealing, says Kaiser Health News in its recent article, “How To Get Long-Term Care At Home Without Busting The Bank.” Most people see long-term care as a home care problem, and they can see a benefit to insuring people for the likelihood of where care is going to be needed first: at home.
However, people are using home care, and a smaller percentage are using nursing home care. People think they may begin needing care at home but eventually will need care in a facility. Research shows that is not true. People are usually able to stay at home for the entire time.
There are currently more than 6 million older Americans who have a “high need” for long-term care, according to the U.S. Department of Health and Human Services. That’s defined as requiring daily assistance with at least two activities (eating, bathing, toileting, dressing, continence or transferring from a bed to a chair) that lasts at least 90 days or a need for substantial assistance due to severe cognitive impairment.
It’s estimated that about 52% of adults reaching age 65 today will need these services, with half needing it for two years or less, 12% for two to four years and 14% for more than five years. However, fewer than 10% of older adults have purchased long-term care insurance. It’s dropped in popularity, as premiums increased and insurers left the market. No one knows if the industry can fix its major problems.
It may be your goal to cover several years of home-based care—not nursing home care. If so, you could buy a less expensive policy with fewer features. The average annual cost for care provided by a home health aide was about $46,000, compared to $82,000 for a semiprivate room in a nursing facility. That’s about six hours of care, seven days a week. Although it is not enough for seniors with serious, disabling illnesses, it could work to relieve an unpaid family caregiver who is on-call 24/7.
If you end up needing nursing home care, you could look at a “qualified long-term care partnership policy.” It’s available in every state except Alaska, Hawaii, Illinois, Massachusetts, Mississippi, New Mexico, Vermont, and Washington, D.C. These little-known insurance products are designed to help seniors preserve their assets, if they become seriously ill, require nursing home care and want to be eligible for Medicaid. That program pays for about 50% of nursing home costs in the country.
To qualify for Medicaid, most states have strict assets limitations. However, with a partnership policy, every dollar received in long-term care benefits is exempted from Medicaid’s asset test and protected from seizure by the state.
There are a number of unknowns about partnership policies. There does not appear to be any reliable statistics on how many people who own them eventually turn to Medicaid to pay for nursing home care, nor is there information on the number of partnership programs that have been sold or the size of benefits that have been paid to policyholders.
To start preparing, seniors are advised to get a clear picture of the average home care and nursing home care costs in their state, so they have a better understanding of what kind of coverage they need. Consult with an elder law attorney to talk about options and make long term care planning part of your overall estate plan.
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Reference: Kaiser Health News (July 27, 2017) “How to Get Long-Term Care at Home Without Busting the Bank”