Contrary to what many people believe that Medicare and private health insurance programs do not pay for the majority cost of Long Term Care, planning is very important to;
Get the care you need
Remain independent
Protect your assets
Not to outlive your assets
Long Term Care planning can be a complex and arduous process and it is always recommended to contact a Long Term Care Specialist to consult for options for your individual unique situation. Since every individual's situation is different, there is no "one size fits all" plan to accommodate everybody with one-standard plan.
In order to craft a personalized plan, you should have a good understanding of the following subject matters and also discuss these issues with your Long Term Care Specialist.
Your risk of needing Long Term Care: This is most likely the foremost topic in the minds of people where they don't want to spend money on something that they may or may not need in the future. While there is no certainty that an individual may or may not need Long Term Care in the future, referring to the "Long Term Care Facts" can help an individual to make a decision (click here to see the Fact on Long Term Care).
Review your current insurance coverage: Unless you specifically requested and purchased, your health insurance coverage will provide very little, if any at all for Long Term Care needs. Furthermore, your Medicare, Medicare Supplement or HMO may have the same small coverage as well.
Can you be self insured: You may want to pay for your Long Term Care needs privately (out of pocket or self-insured). This is a financial decision and should be discussed with a Financial Advisor. Your available resources can be your 401(k), retirement funds, savings, pension plan yet the consequences of outliving your assets should be considered and this subject should be discussed with a financial planner.
Assessing the physiological impact of needing Long Term Care: This is most likely one of the most important aspects of having a Long Term Care plan as it provides independence to the individuals and takes away being a burden upon relatives and the loved ones.
Contact a prominent Long Term Care insurance company: There are quite a few companies that provide Long Term Care plans. Making a decision can be somewhat confusing. This topic is covered in Long Term Care Insurance Details.
Have a Long Term Care specialist evaluate your existing Long Term coverage: Since Long Term Care plans have been around for a short period of time, extreme changes in the Long Term Care industry may have important effects on the existing plans. Further more, the increase of health care cost as well as inflationary erosion of the daily benefits may also have an adverse affect on the existing plans.
Thus it is strongly recommended to have your existing coverage evaluated by a Long Term Care Specialist to make sure that it keeps up with the current changes as well as your current personal situation.
Long Term Care generally provided in two types of forms;
Home and Community-based Care (HCBS)
Facility Based Care.
Home and Community-based Care
Home and Community-based Care is provided to help the individuals to stay at home and live as independently as possible. Nevertheless, most people still need and receive Long Term Care services from the providers for activities such as bathing, dressing or supervision.
Some of the most common Home and Community-based Services are:
Adult Day Service (ADS) Programs: This program is designed to meet the cognitive or functional impairments of adults as well as social interaction and a place to stay when the families are at work (health, social and other support services in a protective setting). These programs do not provide 24-hour services and typically operate normal business hours.
Case Managers - Geriatric Care Manager: These are cares mostly provided by health care professionals as to assisting, coordinating and managing Long Term Care services, developing a plan and monitoring the Long Term Care plans over an extended time period.
Emergency Response Systems: This an automatic response service in case a medical or other emergencies via electronic monitors. It is particularly used by individuals who live alone, wearing a device to activate in case of an emergency.
Friendly Visitors - Companion Services: It is generally provided by volunteers who regularly visit (under two hours) people who are frail or living alone.
Home Health Care: This typically includes skilled, short-term services such as nursing, physical or other therapies ordered by physician for a specific condition.
Home Care: This type of care mostly limited to personal care such as bathing, dressing meal preparation and household chores.
Homemaker - Chore Services: This assistance is provided for general household activities such as meal preparation, routine household care and chores such as washing floors, windows, etc.
Meals Program: It includes so called "Meals-on-Wheels" or congregate meals that are provided in a wide range of community settings.
Respite Care: This is a temporary relief provided to the families who are responsible for caring family members. It is generally provided in the home, adult day centers or nursing homes.
Senior Centers: This is a program that provides variety services including nutrition, recreation, social and education as well as giving information to assist people to find the services that may need.
Transportation Services: It is provided to go to medical appointments, shopping centers as well as variety community services.
Facility Based Care
Facility based cares are known by variety names such as assisted living, adult foster care, nursing homes, Continuing Care Retirement Communities and provide various Long Term Care services. Services are often regulated by states and services range from managing medication, supervision, special programs for Alzheimer's.
Some of the most common Facility Based Care Services are:
Adult Foster Care: This is provided to group of people or to the individuals who can not live safely on their own or need help function. License requirements and terminology used for this type of facilities vary in a great deal from one state to another.
Board and Care Homes: These are smaller private facilities (generally 20 or fewer residents) and also called residential care facilities or group homes. Staff is available for 24 hours a day where meals and personal care is provided on the premises (nursing and medical attention usually not provided on the premises). License requirements and terminology used for this type of facilities vary in a great deal from one state to another.
Assisted Living: This is the facility for people who need to live in a community setting and may need (or expected to need) assistance functioning, yet do not need as much care as in a nursing home. These facilities may range from 20 people to 120 or more units where residents generally live in their own apartments and receive support services such as meals, personal care, help with medication, laundry, social programs, etc.
Continuing Care Retirement Communities (CCRC): These facilities are also called life care communities and offer several levels of care in one location from little or no care to assisted living or nursing facilities. The fee structure of these facilities varies depending on the community where there may also be a one-time entrance fee.
Nursing Homes: These facilities are also called Skilled Nursing Facilities (SNF) or convalescent care facilities. They provide wide range of services such as rehabilitation services with physical, speech therapy, as well as assistance with ADLs. Some people need to stay in these facilities for a short time where some people may stay longer due to chronic physical health or cognitive conditions that require constant supervision.
Males who reach the age of 65 have life expectancy of additional 16.8 years. 1
Females who reach the age of 65 have life expectancy of additional 19.8 years. 1
Approximately 60 percent of individuals over age of 65 will require at least some type of Long Term Care. 2
Medicare nursing home coverage is so limited (it is mainly an assistance for short term patience recovering from hospital stays), in fact it only paid 13 percent of Long Term Care costs in 2002. 3
A government study predicts that the nursing home cost will raise 5.8 percent per year through 2010. 4
Average nursing home cost is between $60,000 to $80,000 per year and average cost for a private room is $70,000 per year. 5
Approximately 63 percent of people over 65 and 37 percent of people 64 and younger will need Long Term Care. 6
Nearly 28 percent (three in ten) adults indicate that they are "very" worried that they will not be able to pay for nursing home or home care services. Nearly 32 percent (one third) of adults say that it is just something that they have ever thought about. 7
Estimated public and private on Long Term Care exceeds $180 billion in 2002 where $37.2 billion was paid out of pocket by individuals or families 8
According to The Alzheimer's Association, about 46% of people over the age of 85 have dementia or Alzheimer's. 9
Over the next 50 years, elderly population will grow from about 12% to over 20%, which will put a burden on the tax base and availability of money for government programs and the availability of younger caregivers. 9
Overweight and obese people in the United States are increasing dramatically where obesity is a major reason for disability and poor health in the elderly. It is estimated that the effects of obesity will increase nursing home enrollments by an additional 15% to 20% by the year 2020. 9
Most healthy people in their 50s and early 60s prefer to ignore this future problem and their lack of planning will further burden public programs in the future. 9
1 Fowles, D., Greenberg, S. "A Profile of Older Americans: 2005" Administration on Aging, U.S. Department of Health and Human Services. 2005 edition.
2 "Own Your Future", Administration on Aging, U.S. Department of Health and Human Services. December 2002
3 Greene, Kelly. "Medicaid Maneuvers-Getting Uncle Sam to pay for long-term care has more drawbacks than you think," The Wall Street Journal, February 23, 2004.
4 Dykes, J.S., "The Outlook for Long-Term Care Insurance," Kiplinger's Retirement Report, April 2003.
5 Health Care and the 2004 Election: Long-Term Care 2004, Kaiser Family Foundation, June 2005
6 "Caregiving in the U.S.", National Alliance for Caregiving and AARP. Washington, DC: Author, 2004.
7 "National Survey on the Public's Views About Medicaid" Kaiser Family Foundation, June 2005
8 Komisar, H., Thompson, L. "Who Pays for Long-Term Care? Fact Sheet", Long-Term Care Financing Project. Washington, DC: Georgetown University Press, 2004.
9 Statistical abstract of the United States, 2005
Most financial advisors agree today that Long Term Care is an important part of an overall planning and it has a potential to undermine and destroy an estate. It should also be considered that since the personal situation changes from one person to another, the planning process will most likely be different for every individual (people are also motivated by different concerns, and not everyone is in the same phase of his life cycle.)
Main concern for individuals is the current cost, and the imminent possibility of increasing health care which may potentially drain the assets of a person within a short period of time, consequently resulting for individual to outlive his assets.
Quoting couple of Long Term Care Facts may put more emphasis on this subject:
According to the statistics, average nursing home cost is between $60,000 to $80,000 per year and average cost for a private room is $70,000 per year (Health Care and the 2004 Election: Long-Term Care 2004, Kaiser Family Foundation, June 2005)
and approximately 60 percent of individuals over age of 65 will require at least some type of Long Term Care ("Own Your Future", Administration on Aging, U.S. Department of Health and Human Services. December 2002.)
Further more, as it was reported in The Wall Street Journal, "... when people think about threats to their retirement savings, 'they primarily think about market losses'... what they fail to consider are 'the nonmarket-related threats - health care, long-term care - the catastrophic events' that can cause as much harm, or more, as a volatile market." (Glenn Ruffenbach. "Cracks in the Nest Egg: A look at the biggest mistakes..." The Wall Street Journal, October 22, 2001.)
Another aspect of asset protection by Long Term Care is The State Partnership Program between private insurance companies and the joint state and federal Medicaid program. It is designed to offer limited asset protection for people with limited income and assets (however it does not protect income.)
Plan only works with limited benefit policies (not with lifetime policies) and it protects the policy owner's assets up to the policy maximum limit. For example, if the individual own a 3 year Long Term Care policy with $250.00 daily limit his assets up to $273,750.00 will be protected (3 years x 365 days per year x $250.00 daily benefit.) In order to qualify for this protection, individual has to exhaust his policy benefits ($273,750.00) as well as having to spend down his assets to the point of $273,750.00. He is then eligible to have his LTC paid by Medicaid (assuming his income doesn't exceed state Medicaid reimbursement level for nursing home.)
There are a few major points that the individuals must consider:
If the individual moves out of the state where the State Partnership is offered to another state where this program is not offered, they will not be eligible for the protection in his new state.
When State Partnership program starts, Medicaid determines where and how the care will be provided (i.e. if the individual is receiving home care and qualifies for State Partnership Program, he may not be able to continue with his home health care).
There is no guarantee that the room will be available if the individual leaves temporarily for a hospital visit.
If the individual moves out of the state where the State Partnership is offered to another state where this program is not offered, they will not be eligible for the protection in his new state.
When State Partnership program starts, Medicaid determines where and how the care will be provided (i.e. if the individual is receiving home care and qualifies for State Partnership Program, he may not be able to continue with his home health care).
There is no guarantee that the room will be available if the individual leaves temporarily for a hospital visit.
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A government study predicts that the nursing home cost will raise 5.8 percent per year through 2010. Dykes, J.S., "The Outlook for Long-Term Care Insurance," Kiplinger's Retirement Report, April 2003. |
Estimated public and private on Long Term Care exceeds $180 billion in 2002 where $37.2 billion was paid out of pocket by individuals or families. Komisar, H., Thompson, L. "Who Pays for Long-Term Care? Fact Sheet", Long-Term Care Financing Project. Washington, DC: Georgetown University Press, 2004. |
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