For Your Consideration: Long-Term Care Insurance

First a note to my followers:
Thanks for hanging in there! Blogging has taken a back seat to my day job and side job but after the semester ends in April, I’ll be back on track.  In the meantime, continue to shoot me topics you’d like to see in future posts and check out the personal finance links I post on Facebook and Twitter.  I sure appreciate y’all.

And now for our (un)regularly scheduled programming…

For Your Consideration: Long-Term Care Insurance

While I struggle with the bureaucracy and hypocrisy associated with serving as a good steward of taxpayer dollars, I do enjoy the perks of working for the Federal government, especially the healthcare options.  However, if you think this post is going to be about how the Feds, including our dear friends in Congress, have comprehensive and affordable healthcare packages but can’t seem to provide the same for citizens in need, I appreciate that you think I’m politically savvy and have the balls to criticize my employer.  But this post is about Long-Term Care Insurance (LTCI) and why you should consider it as part of your financial planning process.  Not as exciting as bipartisan policy you say?  Probably not.  But as you put together your personal financial plan you need to think about health insurance needs and costs, now and later.

LTCI is an insurance policy that pays for long-term care beyond what’s covered by primary health insurance or Medicare such as help with activities required as a part of daily life (bathing, dressing, feeding, etc.) or care in a licensed facility like a nursing home.  According to Jane Bryant Quinn, author of Making the Most of Your Money Now, 6 out of every 10 people who are 65 will need long-term care at some point in their lives and not necessarily in a nursing home.  Most long-term care is given in your home, an adult day care center, or an assisted-living community.

Note: throughout this post I say you/I should “consider” not “get” LTCI.  While it makes sense to have a plan that will help pay for future care, LTCI premiums can be expensive.  Coincidentally, a recent New York Times Bucks Blog post stated that the high cost of LTCI is not likely to decrease any time soon – in fact, LTCI premiums have risen by as much as 17 percent in the past year.  Yowsa.

Of course, the insurance premium depends on what you get.  Here’s what typically determines the cost:

1. The age you are when you buy.  The younger you are, the cheaper it is but premiums can rise as you get older (and as the rest of the population lives longer and companies have to pay for more benefits);
   • Sidebar about what’s known as a preexisting condition: while most plans will take everyone, if you have a preexisting condition (an ailment you had in the last 6 months before joining the plan) that the company perceives as high risk, you may have a higher premium or a limit on the type of care the policy will cover.
2. The type of policy.  Plan are either indemnity, which pays a daily benefit, or reimbursement, which pays a percentage of the cost.  Some plans only offer a daily benefit which ranges from $100 to $450;
3. The covered services.  You can cover just nursing home costs, have a home care or respite services option, or you can have a comprehensive plan that covers assistance with daily living plus care in a licensed facility;
4. The benefit period: 2 years, 3 years, 5 years or unlimited.  Not sure why you would get less than unlimited unless you’re in perfect health and you think you’ll only need assistance in the very last years.  (Quinn states that the average nursing home stay is 3 years.)
5. And, lastly, an inflation option.  You want to make sure that your coverage keeps pace with the economy and rising health care costs.

While one intangible benefit of LTCI is peace of mind, your consideration of LTCI should primarily be based on your ability to amass enough in savings and other assets to take care of unforeseen health needs later in life.  If you’re single like me, why not just save more money and use it for your care rather than paying for a policy that you may not use? But in my case, I’m not sure I’ll build sufficient resources (or snag a wealthy husband) to cover my long-term health care needs down the road, despite being pretty certain that I’ll have too much saved to qualify for the LTCI benefits under Medicaid.  If you’re married, what happens if your spouse isn’t able to be your caregiver or you both need care at the same time?  Will your combined assets be sufficient?  To throw something else in the mix, you can also purchase LTCI for your parents, your husband/wife/same sex partner, or an adult child – maybe it is one them you should be concerned about?  Do you have the financial wherewithal to take care of an aging loved one and yourself?  And of course, one more consideration…can you afford another monthly bill?   What to do, what to do…

Intrigued, yet overwhelmed?  Not sure if this type of coverage is necessary for you and your family?  Take a few minutes and learn more about LTCI by checking out the American Association for Long-Term Care Insurance (http://www.aaltci.org/) for a wealth of resources and information.   If you are seriously considering it, contact your employer to see if they offer a decent option before moving on to the private companies.  I’ve received several letters about the Federal plan in the last month – you don’t have to wait until open season to sign up.

Well, I think you have enough to consider for now.  Let me know if you have any follow-up questions on LTCI.  And if I may close with a word from the indisputable anthropomorphic Winnie the Pooh (so what I’m quoting a stuffed animal), “A little Consideration, a little Thought for Others, makes all the difference.”

Tags: long term care insurance