The longer you live, the greater the chances you'll need some form of long-term care. If you're concerned about protecting your assets and maintaining your financial independence in your later years, long-term care insurance (LTCI) may be for you.
What is long-term care?
In general, long-term care refers to a broad range of medical and personal services designed to assist individuals who have lost their ability to function independently. The need for this ongoing care arises when you have a chronic disability or when physical/mental impairments prevent you from performing certain basic activities, such as feeding, bathing, dressing, and toileting.
Who needs it?
As we age, the odds increase that we'll need some form of long-term care at some point during our lives. And with life expectancies increasing at a steady rate, the likelihood of needing long-term care can be expected to grow in the years to come.
What are the three levels of long-term care?
Because some long-term care insurance policies will subsidize only certain forms of long-term care, it is important to understand the accepted terminology. Long-term care may be divided into three levels:
- Skilled care--continuous "around-the-clock" care designed to treat a medical condition. This care is ordered by a physician and performed by skilled medical personnel, such as registered nurses or professional therapists. A treatment plan is established.
- Intermediate care--intermittent nursing and rehabilitative care provided by registered nurses, licensed practical nurses, and nurse's aides under the supervision of a physician.
- Custodial care--care designed to assist one perform the activities of daily living (such as bathing, eating, and dressing). It can be provided by someone without professional medical skills but is supervised by a physician.
Tip: Note that the above terms may be defined differently by Medicare.
Where is long-term care provided?
Although long-term care can be provided in a number of places, long-term care insurance policies sometimes limit the facilities where you can choose to receive long-term care. Most long-term care is provided in the following venues:
Although some homes for the aged provide custodial care primarily, many nursing homes can provide skilled care, intermediate care, and custodial care. When a patient no longer needs skilled care, for instance, he or she can be transferred to an intermediate or custodial section within the same facility. Nursing homes provide 24-hour care and can usually offer a great range of care, including intravenous therapy and physical therapy.
Home health care
Home health care makes particular sense when you're recovering from an injury or illness and don't need 24-hour care. It also makes sense when the type of care you require is custodial. Home health care is most often provided by a visiting nurse, a therapist, or a home health aide. Often, several visits to your home are made each week to provide you with the appropriate care. This care ranges widely and can include respiratory therapy, cleaning and bandaging of wounds, monitoring health, and assistance with bathing and dressing.
Adult day care
Adult day-care centers provide care in a group setting for aged or disabled people who live at home. Such people may need help with the basic activities of daily living or perhaps have a slight mental impairment. Often, these people live with a relative who works and cannot take care of them during the day. Adult day-care centers usually provide an elderly person with social interaction, therapeutic activities, preventive health services, and nutritional meals.
A hospice is a place that provides comfort and care for terminally ill patients. This type of care may be provided in a special facility or perhaps at home.
Respite care provides some time off for the caregiver (usually a relative) who regularly provides care for an elderly or disabled person. It can be offered in a nursing home (by way of a temporary confinement of the elderly person) or at home through the services of a home health aide.
But won't the government look out for me?
Medicare pays nothing for nursing home care unless you've first been in the hospital for 3 consecutive days. After that, it will pay only if you enter a certified nursing home within 30 days of your discharge from the hospital. For the first 20 days, Medicare pays 100% of your nursing home care costs. After that, you'll pay $176.00 in 2020 per day for your care through day 100, and Medicare will pick up the balance. Beyond day 100 in a nursing home, you're on your own--Medicare doesn't pay anything.
If you're at home, Medicare provides minimal short-term coverage for intermediate care (e.g., intravenous feeding or the treatment of dressings), but only if you're confined to your home and the treatments are ordered by a doctor. Medicare provides nothing for custodial care, such as help with feeding, bathing, or preparing meals.
Medicaid covers long-term nursing home costs (including both intermediate and custodial care costs) but only for individuals who have low income and few assets (eligibility guidelines vary from state to state). You will have to use up most of your savings before you qualify for Medicaid, and aside from a small personal needs allowance, you will have to use all of your retirement income, including Social Security and pension payments, to pay for your care before Medicaid pays anything. And once you qualify for Medicaid, you'll have little or no choice regarding where you receive care. Only facilities with Medicaid-approved beds can accept you, and your chances of staying in your own home are slimmer, because currently most states' Medicaid programs only cover limited home health care services.
Looking out for yourself
If you want to retain your independence, protect your assets, and maintain your standard of living while at the same time guaranteeing your access to a range of long-term care options, you should look into options for your future.
Standalone Long-Term Care Insurance
This insurance might be right for you if you meet the following criteria:
- You're between the ages of 40 and 84
- You have significant assets that you would want to preserve as an inheritance for others or gift to charity
- You have an income from employment or investments in addition to Social Security
- You can afford LTCI premiums (now and in the future) without changing your lifestyle
Several factors affect the cost of your long-term care policy. The most significant factors are your age, your health, the amount of benefit, and the benefit period. The younger and healthier you are when you buy LTCI, the less your premium rate will be each year. The greater your daily benefit (choices typically range from $50 to $350) and the longer the benefit period (generally 1 to 6 years, with some policies offering a lifetime benefit), the greater the premium.
Although the premiums are guaranteed renewable, meaning the insurance company cannot cancel the policy as long as you pay the premium, they are not guaranteed, meaning they can and likely will increase over time.
A Life Insurance Policy with a Chronic Illness Benefit rider
Your life insurance company may offer a life insurance policy with a chronic illness benefit rider. Farm Bureau offers a Daily Living Benefit Rider for an additional premium which is typically much less than the premium for a standalone LTC policy. The Daily Living Benefit Rider allows Client/Members to accelerate a portion or all the life insurance death benefit as long as the insured is unable to perform 2 of the 6 activities of daily living.
If utilized, the accelerated payments reduce the amount of death benefit that will be paid upon death of the insured. If not, the entire death benefit will be paid to the beneficiary, allowing you to avoid the “use it or lose it” nature of standalone LTC policies.
The accelerated payments are made to the policyowner, providing greater flexibility regarding the type and location of care needed.
There are a variety of ways to financially prepare for whatever the future may hold. For details on specific options and professional advice, consider meeting with a Farm Bureau agent or advisor.